Privatisation by stealth
The externalisation of the Australian Public Service (APS) has been characterised by the media, politicians and expert observers as 'outsourcing' or 'privatisation by stealth'.
The committee received a substantial amount of evidence on matters relating to the increasing externalisation of the APS workforce. Submitters raised numerous concerns about the negative impact of the trend on APS capability.
For example, the Centre for Policy Development (CPD) highlighted that externalisation had 'worn away' APS capability on multiple fronts:
A history of outsourcing the design and delivery of service systems to private and not for profit firms, and a similar predisposition to contract out for advice on policy development, has worn away internal APS knowledge, experience and expertise...
By externalisation, the committee is referring to external, 'privatised' or 'outsourced' workforce arrangements such as labour hire, independent contracting and consulting — arrangements where there is no direct employment relationship between the worker and the APS agency. The worker is not an APS employee. This is in contrast to an APS employee who is directly employed (on either an ongoing or non-ongoing basis) by an APS agency, generally under the Public Service Act 1999 (PS Act).
Labour hire is a 'triangular relationship' in which a labour hire firm supplies a worker to a third party (i.e. the host) in exchange for a fee. In this arrangement, there is no direct employment or contractual relationship between the host and the labour hire worker. Instead, the worker is engaged by the labour hire firm, either as an employee or as an independent contractor.
This chapter will refer to workers provided to an APS agency (i.e. the host) through a labour hire firm as 'labour hire workers' or 'labour hire contractors' interchangeably.
The Independent Review of the APS (Thodey Review) considered that the increased use of labour contractors and consultancy services warranted specific discussion in its final report. It noted that about a quarter of the submissions to the review commented on the use of such arrangements, and that most submitters expressed concern about the growing size of the APS's external workforce and the negative effect on in-house capability.
The Thodey Review concluded that labour contractors and consultants were increasingly being used to perform work that had previously been core
'in-house' capability for the APS. It pointed out that over the previous five years (to 2019) government spending on contractors and consultants had significantly increased while spending on APS employee expenses had remained steady.
This chapter will examine the externalisation of the APS workforce, in particular the extensive use of outsourcing arrangements such as labour hire.
Matters addressed include:
the legacy and impact of the ASL (average staffing level) cap;
the scale of labour hire within the APS;
whether labour hire arrangements are cost-effective; and
the impact of labour hire arrangements on workers, service delivery standards, and APS capability more broadly.
The chapter also includes a section focusing on the specific operations of the Department of Veterans' Affairs (DVA) in order to illustrate submitter concerns.
Impact of the ASL cap
Much of the evidence the committee received in regard to APS labour hire arrangements emphasised the adverse impacts of the ASL cap.
What is the ASL cap?
When discussing public sector employees, the Commonwealth budget papers use the ASL, a method of counting that adjusts for casual and part-time staff, in order to show the average number of full-time equivalent employees within an agency.
In the 2015–16 Budget, the Coalition Government undertook to maintain the size of the general government sector (GGS), excluding military and reserves, at around or below the 2006–07 ASL of 167 596.
This cap, often referred to as the ASL cap, ASL rule or staffing cap, is still applied across the GGS, which incorporates all of the APS and a range of government agencies. The ASL cap and any adjustments to it are published in the federal budget papers each year.
Submitters overwhelmingly advised the committee that the ASL cap was a core factor driving the externalisation of the APS.
The Community and Public Sector Union (CPSU) argued that the practical effect of the ASL cap was to force agencies to use labour hire workers to do core, ongoing work that would normally be performed by APS employees.
While acknowledging that there were a range of factors that contributed to the increase in labour hire arrangements, the CPSU posited that the ASL cap was 'an absolutely key driver', a position consistent with information it had received from senior APS agency managers involved with decisions to increase labour hire.
Ms Melissa Donnelly, National Secretary of the CPSU, outlined:
The primary driver given to staff about the use of labour hire is the ASL cap. Agencies are limited in how many APS employees they are allowed to employ. Therefore, the only option available to agencies is the use of labour hire.
Ms Donnelly spoke of an 'explosion' in the use of labour hire in the APS since the introduction of the ASL cap policy:
The government's ASL cap has driven an explosion in the use of labour hire. Since 1 July 2015, around $7.8 billion has been spent on labour hire. In 2020 alone, it was $2.1 billion. We estimate that up to one in five of the total workforce of APS agencies are engaged as labour hire and contractor employees, and, with some agencies, double that. Our estimate is that there are as many as 20,000 labour hire employees engaged across the APS.
The CPSU informed the committee there was a distinct lack of service-wide data on labour hire workers. However, it noted that by collating data from a number of publicly available sources, it was possible to identify a clear increase in APS labour hire expenditure, coinciding with the introduction of the ASL cap in 2015.
As Mr Osmond Chiu, Senior Policy and Research Officer for the CPSU, summarised:
…unfortunately, there's no transparency about how many labour hire employees there are. What is clear is that the ASL cap has been the driver of this increase.
The CPSU argued that while the advent of the ASL cap was not the only decision to undermine the capability of the APS, it had proven to be a 'tipping point' in public debate:
There is an astonishing degree of unanimity and frankness about its [ASL cap] effects. Senior public servants, usually extremely circumspect about government policy, have gone on the record in Parliamentary committees stating that the ASL cap has forced them to employ labour hire.
This assertion tallied with evidence lodged by APS agencies and other submitters to the Senate Legal and Constitutional Affairs References Committee in its 2020 inquiry into the impact of changes to service delivery models on the administration and running of government programs.
The CPSU was strongly of the view that while the ASL cap made government appear smaller, it did so at the expense of long-term APS capability and quality service delivery for Australian communities. It observed:
The ASL cap is an absolute limit on the number of people who can be employed in Commonwealth Government. It's not a limit on how much work is done, or how much money is spent, or even how many people can do work on behalf of the government — it is only a limit on secure employment.
Professionals Australia characterised the ASL cap as a 'false economy'. It described the cap as amounting to 'privatisation by stealth' through forcing agencies to shift work and resources from APS agencies to private consulting and contracting firms.
The Centre for International Corporate Tax Accountability and Research (CICTAR) also contended that the ASL cap had been a huge factor in driving the use of external workforce arrangements.
Professor Andrew Podger also noted that the extensive use of labour hire in the APS was 'particularly problematic'.
He characterised the ASL cap as a 'crude instrument' that did not function as an efficiency measure. He observed that it was unclear how the Department of Finance identified the level for the ASL cap, and that as a policy its focus on restrictions seemed inefficient. He explained:
What criteria do they use for that cap? The cap is in addition to a cap on resources, and that is the control we ought to maintain: the cap on how much money is appropriated for administrative expenses. Then we should let the agency work out what allocation of that money will get the most value for money and the best delivery of services. That's what the agencies would like to do, I should think, and we should let them do it, and they will get more value for money out of it.
Professor Podger acknowledged the need for the APS to have an element of flexibility in its workforce. However, he noted that this could be achieved using the non-ongoing staff arrangements available under the PS Act, without the need for a restrictive staffing cap and the associated overreliance on labour hire. He stated:
Some agencies do need flexibility in terms of having some staff who are not ongoing. You can see that in places like Services Australia, which does have fluctuating levels of demand and needs to be able to get extra staff from time to time and then let them go. But that was the purpose of having the non-ongoing staff arrangements in the Public Service Act: to give agencies that flexibility. An agency can use that and then have, if you like, a reserve workforce that it draws on from time to time and that it can train, to ensure that they are able to do the jobs that the agency wants. The agency [is] able to control the employment. With labour hire they have no control, other than through a contract, as to which individuals are employed. Those individuals are not subject to the APS values or any of the integrity issues that are implicit in the Public Service Act. Get rid of the ASL cap but also rethink the outlay for hire arrangements and use non-ongoing staff arrangements instead.
Observations from the Thodey Review
The Thodey Review examined the impact of the ASL cap on the APS, and ultimately recommended that the ASL cap be abolished.
It identified a decline in APS capability across key areas of responsibility — policy advice, regulatory oversight, and delivery of services and support to the public, as well as internal enabling functions. The final report concluded that four reasons were behind the decline in capability; two of which were staffing level caps (that is, the the ASL cap) and the increased use of contractors and consultants.
In regard to staffing level caps, the Thodey Review summarised:
Staffing-level caps have made it difficult for agency heads to retain some functions or to maintain them at the same size and strength as previous years. Some agencies reported that the caps have made it difficult to maintain long-term strategic policy functions, which has led to a divestment in analytical capability.
Additionally, it noted that while caps have 'undoubtedly achieved efficiencies' across the APS as intended, 'they now risk the unintended consequence of reducing capability across the service'.
The Thodey Review acknowledged that it was not possible for the APS to have 'in-house' expertise in all areas, and that there was clearly a benefit in leveraging external providers where required.
However, the report strongly emphasised that the use of external capability needed to be 'strategic and well-informed', with a sustained, overarching focus on achieving value for money and better outcomes.
It concluded that the APS must:
make decisions on the use of external capability by reference to a whole-of-service workforce strategy that identifies the core capabilities in which the APS should invest in building in-house – with external capability used to perform non-core or variable work activity;
manage use of external capability closely, from the contract design stage through to performance of the prescribed task; and
ensure that all arrangements lead to a transfer of knowledge to the APS.
The report made clear that the APS needed to find the right balance between retaining and developing core in-house capability, while also leveraging external capability to ensure a 'sustainable and efficient operating model for the decades ahead'.
In regard to the ASL cap it concluded:
Fiscal discipline and efficiency are critically important in public sector organisations but the Average Staffing Level rule is not essential to realising this objective.
The Thodey Review instead suggested that all agency heads should be accountable for managing their workforce and delivering government priorities within allocated budgets, not for simply adhering to a cap. It explained:
Removing the caps will force agency heads to take decisions on staffing resources, whether APS employees, contractors or consultants, based on capability needs, the most efficient use of resources, return on investment, best use of skills and other sensible criteria.
Following on from these conclusions, recommendation 19 of the Thodey Review proposed a range of actions centred on the development of a 'whole-of-service' workforce strategy which would eventually allow for the ASL cap to be abolished. Specifically, it recommended the government:
Develop a whole-of-service workforce strategy to build and sustain the way the APS attracts, develops and utilises its people, to ensure that it can perform its functions.
APSC to develop a whole-of-service workforce strategy for Secretaries Board endorsement and implementation by all agencies.
APSC to monitor progress and update the strategy regularly.
Government to abolish the Average Staffing Level rule after the APS has demonstrated its workforce planning capability through the strategy.
In its response to recommendation 19, the government agreed to the development of a workforce strategy but directly rejected the proposal to abolish the ASL cap. It reasoned:
The Government will continue to manage the size of the APS through the Average Staffing Level rule, and support flexible application of the cap to deliver priorities. The Government notes the recommendation that it abolish the Average Staffing Level rule in light of outcomes arising from the APS Workforce Strategy; it considers the Average Staffing Level rule is working effectively and will keep its application under consideration in light of workforce needs and the Government's priority to deliver budget repair.
During the committee's inquiry, the Department of the Prime Minister and Cabinet (PM&C) affirmed that the ASL cap continues to be government policy, and that the APS must work within that policy.
What is the scale of labour hire within the APS?
During the course of the inquiry the committee encountered significant difficulties in ascertaining the extent of labour hire arrangements within the APS, both in terms of the number of workers and the total level of expenditure.
A lack of data
Submitters highlighted the lack of transparency from the government on the matter, and noted that it was difficult to build a comprehensive picture of APS labour hire arrangements due to the lack of data collected and published. They reasoned that the inadequacy of the available information demonstrated serious deficiencies in the Commonwealth's reporting requirements on the issue.
For example, the CPSU informed the committee that there was very limited publicly available data on labour hire in the APS, both in terms of expenditure and the headcount involved.
The Thodey Review made similar observations in regard to the lack of available data. It noted that data on the growing size of the APS's external workforce was not gathered or analysed centrally, and often proved inadequate. It stated:
… the number of contractors and consultants working for the APS is not counted and data on expenditure are inconsistently collected across the service. Data insights that would shed light on whether contractors or consultants met objectives are not routinely aggregated.
Estimates of scale
Despite the absence of centralised data, the committee received estimates from various submitters on the number of positions filled and the amount of expenditure on labour hire. It also considered evidence from the Thodey Review and took into account estimates from media analysis.
For example, the Thodey Review cited information from the 2018 inquiry into labour contracting in the government, initiated by the Joint Committee of Public Accounts and Audit (JCPAA). Submissions to the JCPAA inquiry revealed that spend on contractors more than doubled across a sample of 24 agencies between 2012–13 and 2016–17. AusTender data showed a similar increase in the total value of consultancy contracts across the APS, over the same four years, from $386 million in 2012–13 to $545 million in 2016–17.
The following graph, reproduced from the Thodey Review final report, illustrates the increased contractor and consultancy spend since 2012, while APS wages and salaries remained largely flat.
Figure 3.1: Percentage change in spend on employees, labour contractors and consultancy contract notices.
[Source: Department of the Prime Minister and Cabinet, Our Public Service, Our Future: Independent Review of the Australian Public Service, 13 December 2019, p. 186. See footnote 355 in that document for further information.]
Additionally, the Thodey Review noted that the increases in contractor and consultant spend had occurred against the backdrop of a significant increase in the size of programs administered by the APS, but almost no increase in departmental budgets. It concluded:
The review has heard, and data suggest, that contractors and consultants are being used to meet the increased burden of program delivery — work traditionally done by APS employees — as well as policy design and implementation.
The CPSU estimated that at least 20 000 APS positions are filled on a labour hire basis. It advised that it had arrived at this figure through collating various publically available sources, including data from Senate estimates, Freedom of Information (FOI) requests, and AusTender.
In regard to labour hire expenditure, the CPSU advised that based on AusTender data it had identified an increase in spending on temporary personnel service contracts from about $289 million in 2013 to $2.1 billion in the 2020 calendar year.
Mr Chiu of the CPSU explained:
Roughly, it's been a 612 per cent increase in spending on labour hire since this [Coalition] government came into power. If you compare it against budget data on how much spending on public sector wages and salaries have increased, that's only been about 10 per cent. So I think that alone has shown there's been a massive increase in spending on labour hire compared to ongoing spending on APS staff.
The CPSU informed the committee that as at 23 February 2021, the total spend on 'Temporary Personnel Service' contracts published on AusTender since 1 July 2015 was just over $7.766 billion. It highlighted that the list of 32 000 contracts (which included over 5000 contracts for DVA) did not include all the various labour hire contracts signed by APS agencies, given that there is no standard categorisation for this type of contract in AusTender.
CICTAR also commented on the 'very limited and very problematic' data available on AusTender. It advised that through analysing the AusTender 'Temporary Personnel Services' data, it had calculated that between 1 July 2020 and 1 July 2021, the federal government awarded $2.6 billion in temporary personnel contracts, an increase on the $2.4 billion for the corresponding period in 2019–20. CICTAR noted, however, that the AusTender data, and therefore the resulting figures, did not capture all labour hire contracts.
Dr Claire Parfitt, Senior Research and Strategist for CICTAR, highlighted the challenges in gaining an accurate picture of labour hire arrangements across the APS, given that the government knew so little about its own practices. She explained:
Nailing down the figures of contractors within the APS has proven very, very difficult. In fact, a core part of our submission is that the government knows very little…A real core problem in researching this area is the government knows very little about its own practices in this regard, which is one of the things that we would recommend changes, that the government informs itself better in this domain.
The committee is also aware that the lack of official government data on the expenditure and number of people engaged through external arrangements such as labour hire contracting has also been a regular feature in media commentary.
For example, a 2020 ABC analysis of 120 000 federal government contracts — for services such as consulting, staffing and recruitment — suggested the Commonwealth's market for 'private' labour had doubled in the past five years to be worth more than $5 billion a year.
Similarly, analysis conducted by the Canberra Times in 2021 indicated that nearly one in five people working in federal government departments were employed on external contracts or through labour hire firms.
The Australian Public Service Commission (APSC) advised the committee that it did not collect data on the number of labour hire workers used by agencies to supplement their workforces. It confirmed that it only collected data in relation to public servants and people employed under the PS Act, and that data on labour hire was 'held by agencies'.
When queried by the committee as to why the APSC did not collect that data, Mr Peter Woolcott AO, the APS Commissioner, responded:
…we are responsible for collecting data around Australian public servants—the 150,000 Australian public servants employed under the Public Service Act. That's our remit. We do that very thoroughly.
Evidence to the Senate Select Committee on Job Security in August 2021 also confirmed that there is no central mechanism tracking labour hire in the APS. For example, an official from the Department of Finance stated:
It is true that there's no central data holding of labour hire information. There is reporting through the AusTender platform of labour hire contracts, but there is no, if you like, aggregated set of data that we possess in Finance—or anywhere else in government, to my knowledge.
The Select Committee on Job Security also traversed the topic with the APSC. In response to a question about whether 'anyone' in the government knew what proportion of the APS workforce was engaged through labour hire, an official reiterated that it was not within the APSC's remit to know:
From the Public Service Commission's perspective, the workforce mix and percentage of labour hire use at agency level really is a responsibility of agency heads. Agency heads are best placed to determine what the appropriate mix of their workforce should be based on their business outcomes. So that's not something I can provide, but it's a question perhaps better put to agencies.
The committee queried the Australian National Audit Office (ANAO) as to whether it would be possible to collect data on the scale of APS labour contracting.
The Auditor-General observed that the crux of the matter was whether the Parliament wanted the data collected. He commented:
Departments report a large amount of detail on APS staffing because the Parliament has required that to happen. If there was a requirement on entities to maintain data on some form of ASL equivalent for c3ontract labour or expenditure on contract labour, they would set up systems to collect the data and do it.
In an effort to ascertain the scale of labour hire usage across the APS, the committee requested staffing profile information from agencies across all portfolios. The committee asked for the following:
The staffing profile for the agency as at 1 July 2021, broken down into:
a) APS ongoing employees: headcount and Average Staffing Level (ASL);
b) APS non-ongoing employees: headcount and ASL;
c) Labour hire staff: headcount and Full-Time Equivalent (FTE); and
d) Other contractors: headcount and FTE.
2) The percentage of staff engaged through labour hire arrangements as a percentage of total agency headcount.
3) The total value of labour hire contracts entered into between 1 January 2021 and 30 June 2021.
The responses received indicated that agencies had differing methods of collecting data, and that many agencies did not collect data that allowed them to disaggregate the numbers of labour hire workers from other contractors.
For example, some agencies advised that their recordkeeping systems did not or could not differentiate between contractors directly procured by the agency (e.g. independent contractors), and workers procured through labour hire firms.
The committee received evidence on the intersection between the prevalence of labour hire arrangements in the APS and multinational tax avoidance.
CICTAR argued that, in addition to diminishing APS capability, the widespread use of external workforce arrangements through multinational labour hire firms also threatened the government's overall fiscal position. It asserted this was because many of the commonly used labour hire firms utilised 'complex, transnational corporate structures that are designed to reduce and avoid taxes'.
The CICTAR submission analysed the operations of a number of labour hire firms commonly used by the APS:
The firms we have analysed include Adecco, Hays, OUTSOURCING Inc, Persol, Randstad, Recruit Holdings and Well Group. Adecco paid no tax. OUTSOURCING Inc and Well Group do not report their income or tax payments to the ATO, so we cannot know if they pay. Persol paid $4 million on over $2 billion in revenue, implying a profit margin of 0.63 per cent in Australia; although the company's profit margin is nearly five per cent. Recruit Holdings paid $8.7 million on $1.7 billion of revenue, better than Persol but still a tiny profit margin of 1.7 per cent. The company's structure, like others we have analysed in our submission, permits extensive related party transactions and prevents transparency to ensure Australian taxpayers know whether or not they are being taken advantage of.
The only company that seems to be making good money in this sector is Hays, which reports a substantially higher profit margin than its labour hire competitors in Australia and, accordingly, pays more in tax. Why is Hays' profit margin, we might ask, and tax bill so much higher than its competitors? In a competitive market, we would expect these other firms to be out-competed if their profits are so weak.
CICTAR proposed a range of oversight and control mechanisms to ensure that labour hire firms paid by the APS provided taxpayers with value for money and performed their contractual obligations to a high standard. It recommended that the APS vet labour hire firms according to past performance, disclose the details of all contracts, require firms to file full financial statements with the Australian Securities and Investments Commission and maintain a register of beneficial ownership.
CICTAR pointed out that the opaque ownership structures of many of the multinational firms contracted to the APS had implications on adherence to the Commonwealth procurement guidelines. It argued that if the APS was not properly informed about who it was contracting with, it was not possible for existing oversight mechanisms (such as the Commonwealth Procurement Rules) to be effective.
For example, CICTAR posited that it was possible for an APS agency to receive tenders from two, seemingly separate companies with different names, only for both to be owned by the same multinational firm.
The committee queried whether CICTAR was aware of any instances where APS tendering arrangements had been distorted by a lack of competition in this way.
In response, Dr Parfitt acknowledged that given the inadequacy of public data there was not enough transparency around APS processes to know which companies tendered for which particular contracts. However, she stated that there were 'scores of examples' as many APS agencies outsourced to the same corporate groups under different names.
To pick a couple of examples…we have the Department of Health contracting with Clicks Recruit, HOBAN Recruitment and HorizonOne, all of which are [subsidiaries] of OUTSOURCING Inc group. They are also contracting with both Chandler McLeod and PeopleBank, which are both subsidiaries of Recruit Holdings. That is also true for the Australian Tax Office. It is outsourcing to both Chandler Macleod, PeopleBank as well as Clicks Recruit and HOBAN Recruitment. It is a process that repeats on and on. The Attorney-General's Department is contracting both with Adecco in its own name and also with Agility, which is a subsidiary of Adecco that was recently rebranded again to Modis.
In relation to this, Mr Jason Ward, spokesperson for the Tax Justice Network Australia (TJNA), flagged that there was also the potential for 'major conflict of interest' where labour hire firms owned by the same multinational outfit were contracted to an APS agency, as well as to a private entity that the APS agency was regulating.
He provided an example of how this situation could occur within the remit of the Aged Care Quality and Safety Commission (ACQSC), the government regulator that assesses and monitors the quality of care and services of private aged care providers. He explained:
...it's really disturbing to find out that a significant portion of the workforce in an agency like the Aged Care Quality and Safety Commission are labour hire workers and [these workers] are inspecting facilities where other employees of the same firms are actually staffing those facilities…
CICTAR advised that the ACQSC contracted its work to a range of labour hire organisations including Adecco, Hays, Randstad and Programmed. It stated that in addition to contracting to the ACQSC to provide quality assessors, all of these firms concurrently contracted to aged care providers to provide nurses, assistants in nursing, maintenance workers and support workers.
To evidence this scenario, CICTAR provided the committee with a number of advertisements for relevant jobs at each of the labour hire firms it listed.
For example, a September 2021 online job advertisement from labour hire firm Programmed sought a Brisbane-based 'Senior Quality Assessor' for a 'casual, 12 month placement' to work in 'an accreditation/quality role' with a 'government organisation'. Based on the information in the advertisement, it appeared as though the 'government organisation' referenced was ACQSC. The advertisement stated:
We are looking for the right people to join our high performing team who are responsible for the assessing and monitoring the performance of individual aged care providers (residential, home care and flexible care) against the Aged Care Quality Standards.
The impact of labour hire
Despite a lack of centralised data making it difficult to gain a comprehensive picture of APS labour hire arrangements, submitters argued that the available data was sufficient to clearly demonstrate the APS's growing use and reliance on external workforce arrangements.
Submitters expressed concern with the large size of the external workforce used to augment the APS, and argued that this chronic overreliance on labour hire hollowed out the APS's capability and diminished the quality of services delivered to the public.
They also contended that the widespread use of labour hire did not represent value for money, given that the external arrangements generally cost the government more than sustaining an in-house APS workforce.
Finally, submitters noted that labour hire arrangements were often not conducive to stable and fair employment conditions for workers, particularly when used for years on end.
These three areas of concern will be examined in greater detail in the following sections.
The committee received evidence that drew attention to the negative impacts of long-term labour hire contracting on workers, given the inherently insecure nature of the arrangements.
The CPSU highlighted the pressures faced by labour hire workers arising from the impermanence of their contract arrangements, including differing pay and conditions and limited opportunities for career progression compared to APS employees.
It explained the impact of insecure work on individuals:
These people do not receive sick, personal, annual, or any other leave entitlements, creating challenges to work-life balance and limited flexibility in planning breaks and time away. This can lead to fatigue and cause further flow-on effects to the efficiency and capacity of the overall workforce.
For example, the CPSU advised that many labour hire workers contracted to the National Disability Insurance Agency (NDIA) were paid less than their colleagues employed directly by the APS. The CPSU also stated that these labour hire workers were often contractually prohibited from discussing their pay rates with colleagues and were afraid of speaking out about workplace conditions. Ms Beth Vincent-Pietsch, CPSU Deputy Secretary detailed:
Our understanding from the members that we have amongst that cohort is that many, if not most, of them are earning $10 or so less an hour than their colleagues doing exactly the same work. We do know that those members are concerned about speaking out because they've been told they have confidentiality requirements around their pay and conditions. Because their employment is so insecure—they can be terminated with only an hour's notice—they're very nervous about speaking out or contacting the union around their pay and conditions. It's a very untenable position for them to be in.
The CPSU also informed the committee that labour hire workers were not covered by the APS bargaining policy or APS industrial relations decisions, which at times could lead to problematic outcomes. It elaborated:
… an example of that was last year , paid pandemic leave was offered to APS non-ongoing employees but the labour hire employees sitting next to them were not offered the same arrangements.
Additionally, it provided an example of the differences in conditions for labour hire workers at Services Australia:
With the [COVID-19] vaccination program that's currently underway in Australia, Services Australia directs that employees, including casuals, have a capacity to get paid time to be vaccinated. But for labour hire workers, Services Australia doesn't pay the labour hire companies, and, as far as we're aware, none of the labour hire companies provide paid time for their staff to get vaccinated.
The CPSU also noted that labour hire workers were not eligible for the pay increases that APS employees were eligible for through the annual increments negotiated through agency enterprise agreements.
The CPSU furnished the committee with feedback from CPSU members working in the Australian Maritime Safety Authority through labour hire arrangements which highlighted the personal and financial stress caused by the insecurity of their work. For example, one member said:
…not receiving an offer of full-time employment nor any pay rise in the 3 years is a recurring blow to my self-esteem. It's not knowing if my contract will be renewed until a few weeks out from expiry of my last [that] causes yearly stress. I believe I am also not eligible to apply for a home loan due to the terms of my employment however, it is hard to even conceive of making such a commitment considering the precarity of my employment.
The CPSU also argued that the ongoing insecure work arrangements had a negative impact on workplace culture and productivity:
It does cause cohesion problems and culture problems within the workplace and in terms of how labour hire employees feel about their security at work. Going to issues like the ability to do your job in a frank and fearless way—that's a hard thing to do if you may or may not be asked back if the labour hire firm gets a complaint about you et cetera. There's a range of ways that the differing conditions and differing job security causes problems in the workplace.
The committee sought information as to whether labour hire workers were generally paid more or less than APS workers doing the same roles.
Mr Michael Tull, Assistant National Secretary of the CPSU, advised that while the situation varied, in some agencies the CPSU was aware of labour hire workers being paid less than comparable APS employees.
Mr Tull further advised that in other agencies, the CPSU was aware of labour hire workers being paid according to or 'pretty closely matching' the pay rate to comparable APS roles as set out in the agency's enterprise agreement. He cited DVA and the Attorney-General's Department as examples of this situation.
However, Mr Tull emphasised that although the labour hire workers were paid similar rates to their APS counterparts, the government still had to pay a premium on top of that to the labour hire company. He noted that this was one of the key reasons why labour hire staff cost more than APS employees.
As part of its inquiry, the Senate Select Committee on Job Security queried the APSC as to whether there was an APS policy or requirement that labour hire workers in an agency receive equal pay to APS employees in that agency at the same level doing the same work. An APSC official responded:
I think the answer to that is no. When people are engaged via labour hire, they're engaged under the terms of their contractual arrangements.
The Department of Finance and the APSC also informed the Senate Select Committee on Job Security that they did not have visibility of labour hire worker remuneration and did not have figures on the wage differentials between APS employees and labour hire workers doing the same role.
Value for money
Evidence received by the committee indicated that the use of labour contracting in the APS was not cost-effective, particularly in light of the margins charged by labour hire providers.
The CPSU expressed doubt in relation to the government's claim that using external providers cost less as it avoided the ongoing expenditure that resulted from recruiting additional public servants. It asserted:
While the full and exact costs of using contractors and labour is unknown due to a lack of data and transparency, that data that is available suggests the Government's claim is false.
The CPSU argued that publicly available data indicated that it cost an APS agency more to engage staff as labour hire or contractors, compared with hiring staff as APS employees.
Similarly, Professor Podger observed that it appeared the APS had lost sight of value for money considerations, and tended to opt for contract and labour hire arrangements even when it demonstrably did not offer value for money.
The CPSU drew attention to the margins charged by labour hire providers which drove up the costs to the APS. National Secretary Ms Donnelly explained:
We know, and a number of agencies have given evidence to Senate estimates and other processes on this—that there is, absolutely, a premium paid to labour hire companies through these arrangements. This is the reason why they cost more than having APS employees. You have a labour hire company that is, itself, clipping the ticket, if you like, to drive their own profits. There have been examples where some agencies have been forthcoming, in estimates and other places, that there is a significant premium.
Additionally, the CPSU pointed out that the higher costs of labour hire compared to direct APS employment did not translate to higher rates of pay for labour hire workers.
To illustrate, Mr Tull of the CPSU outlined an example of this situation within the Commonwealth Director of Public Prosecutions (DPP):
…the DPP told the Senate that they pay 25 to 28 per cent more for labour hire workers than it would cost for APS employees, while at the same time those labour hire workers are paid less than the APS employees. The Commonwealth is paying more in total costs because of labour hire fees, and workers are getting paid less. That's obviously a terrible situation.
The committee heard that the amount paid to a labour hire firm was generally inclusive of:
The committee heard that the rate of the supplier margin and the administrative fee varied across providers and contracts.
For example, DVA advised that over the past three financial years it had used 60 labour hire providers, and in 2020 it negotiated hourly rates and margin fees with 17 of these. It explained that those 17 providers were now DVA's 'preferred providers' and therefore used the most. DVA stated that it now paid a margin of 12 per cent to those 'preferred providers', but prior to 2020–21 and for non-preferred providers, the margin amounts varied by provider.
The committee also heard that agencies did not have any visibility of what labour hire workers were being paid by the providers.
For example, Services Australia advised the committee that it did not have visibility of the remuneration of labour hire workers in its workforce. Similarly, the NDIA stated that it did not have any visibility of what labour hire workers in its agency were paid.
The following exchange between the committee and Mr Roger Winzenberg, Assistant Secretary in the People Services branch of DVA clearly illustrated the situation:
CHAIR: Do you have visibility of the pay rates that are provided to each labour hire employee by the labour hire agency?
Mr Winzenberg: No.
CHAIR: So you don't know how much they are being paid?
Mr Winzenberg: We pay public service rates for public service positions and then we pay the on-costs. We don't have visibility of what the labour hire company pays its employee in hand.
CHAIR: It's a mystery to you how much they are paid?
Mr Winzenberg: The anecdotal evidence we hear from our labour hire employees is that they're paid similar rates to what our own people are paid.
CHAIR: Anecdotal evidence. But you don't have any requirements that they are paid a certain rate?
Mr Winzenberg: As I said, we contract them at the APS rates and then we pay the on-costs, the agency fee. What the actual agency pays their employees in the hand, we don't have visibility of.
The APSC advised that it did not have any visibility or capture any data on the remuneration of labour hire workers, stating that it was 'a matter for agencies'.
Professionals Australia commented on how the concept of value for money was undermined by the consistent use of external workforce arrangements. It observed that each time core APS work was contracted out rather than being conducted in-house, the government made an investment into 'a resource that is lost at the end of the contract'.
The CPSU also detailed how this lack of value for money impacted agency budgets and APS capability more broadly:
…where you're using labour hire, you are getting fewer employees for your salary budget than you could if you were just employing APS employees. When you put that out across $2 billion worth of spending [across the Commonwealth], the numbers really add up. We are talking about a lot of jobs and a lot of money going to labour hire profits that should be going into public service jobs and capability.
Impact on service quality
Evidence received by the committee indicated that the widespread use of labour hire within the APS had hollowed out capability to the extent that the quality of service that many agencies were able to deliver to the public was significantly diminished.
In particular, the committee received a large amount of feedback from CPSU members across the APS detailing the particular impacts of externalisation on the operations of their respective agencies.
The CPSU argued that the extensive use of labour hire encouraged a loss of corporate knowledge and skills, both of which sabotaged service delivery to the public.
Members [of the CPSU] have warned the growth of insecure work has affected the skill base of agencies. The skills and corporate knowledge needed to work in the APS are substantial and the extensive use of labour hire makes it far harder to maintain. Members commented that significant investment is made in staff who then leave for more secure jobs.
Mr Alistair Waters, National President of the PSU Group within the CPSU, catalogued the problems in Services Australia arising from a reliance on poorly trained labour hire workers:
The failure to engage permanent staff that have the experience and the proper training results in poor quality of training and staff that just don't have the necessary experience. It's led to multiple problems, including the creation of reverse workflows, double handling, a dramatic rise in errors, increasing complaints, unnecessary appeals, declining customer satisfaction, and trust and reputational damage to the agency...
The CPSU provided the committee with direct feedback from its members to further illustrate its claims. For example, a member from Services Australia stated:
The training gaps are becoming quite obvious. The idea that you can replace the knowledge held by experienced APS staff by labour hire staff following 'blueprint' instructions will end up costing our customers, and the taxpayer a damn sight more than what it was ever worth.
The CPSU also emphasised that service delivery capacity was lost when APS staff were constantly required to train a steady stream of new labour hire workers due to high turnovers, on top of their usual workloads.
It provided the committee with feedback from its members on this matter.
For example, a member from DVA stated:
There are some areas in DVA that require a bit of training. It's demoralising to see months of training leave with a contractor, because they have gone somewhere else for a permanent position or a longer contract…
A CPSU member from the NDIA stated:
I have trained 8 people in the last 18 months who have all left before they were skilled enough to be useful. We still don't have these positions filled and are about to do it all again. I am facing burnout due to the increased workload and the extra work of training staff who ultimately do not contribute to the team.
Another CPSU member within the NDIA commented:
We have had entire teams made entirely of contractors quit and all that skill and knowledge is lost in an instant. I have had to pick up the work of 3 additional people with no notice, these positions (still going to labour hire) have not been filled almost 12 months later, 4 labour hire [workers] coming and going in the meantime.
The CPSU also cited feedback from members in the ACQSC warning that the agency's 'long-term regulatory capability' was not being retained as contracted staff, many of whom had developed good skills, either did not last their full contract term or were 'head hunted' into permanent positions by aged are providers.
Case study: Department of Veterans' Affairs
The damage to APS capability caused by an overreliance on labour hire is evident in the operations of DVA.
The committee found that the situation within DVA illustrated many of the elements examined in broader terms earlier in this chapter.
For example, the committee heard that the ASL cap had necessitated extensive use of labour hire contractors, which reduced the ability of DVA to effectively administer core services in a timely manner. This in turn negatively impacted on the quality of services delivered to veterans. The committee also found it difficult to gain a comprehensive, sequential picture of the worker headcount and expenditure of DVA labour hire arrangements given the lack of data collected and publicly released.
The following section lays out this evidence as a case study. It is not intended to be an exhaustive catalogue of the operations of DVA.
Impact of the ASL cap and the extent of labour hire arrangements
The CPSU posited that DVA's extensive reliance on labour hire contractors was largely driven by the ASL cap.
The CPSU asserted that in the face of increased case numbers, DVA had relied heavily upon on labour hire to meet the demands, rather than engaging additional APS employees.
As a result of this, the committee heard that DVA operated with a 'blended workforce', comprised of directly engaged APS employees and staff engaged through labour hire arrangements.
In the absence of standardised, collated and regularly updated public data tracking headcount and expenditure on labour hire arrangements, to gain a picture of the blended workforce the committee was required to rely upon sporadic snapshots of information released by DVA in response to direct requests from Senate committees
For example, in April 2021 DVA advised the Senate Select Committee on Job Security that as at 31 January 2021, it employed:
986 labour hire staff (33.4 per cent of the total departmental workforce); and
192 contractor staff (6.5 per cent of the total departmental workforce).
It also advised that for the period 1 July 2020 to 31 January 2021 it procured labour hire and/or contract employees from 80 providers at a total cost of nearly $168.19 million.
Evidence received through Senate estimates showed that:
DVA used the services of 46 separate labour hire providers in 2019–20 at a cost of $82.106 million.
As at 30 June 2020, the headcount of staff engaged through labour hire arrangements was 1246, representing 41.6 per cent of total staff headcount (given that DVA had 1750 APS employees).
As at December 2020, the DVA 'preferred providers negotiated fee' (i.e. the margin) paid to labour hire providers was 12 per cent.
Additionally, in October 2020 DVA was asked through Senate estimates to provide the maximum and minimum fees paid to labour hire firms in 2019–20 as a percentage mark-up on the cost of the labour hire worker.
DVA did not provide the information and instead responded in December 2020:
The Department of Veterans' Affairs does not maintain centralised records on these matters in a form that could be easily reported. Given the broad nature of the question, providing a response would substantially and unreasonably divert departmental resources from its other operations.
DVA acknowledged to the committee that it had needed to 'supplement' its APS workforce with labour hire in order to deal with increased demand and deliver the required services and levels of support to veterans and their families.
Mr Mark Harrigan, Chief Operating Officer for DVA explained:
The No. 1 driver to our increase in labour hire has been the increase in workload, stemming from veterans and their families reaching out for the support they need, which is a positive thing. Our role is to provide them that support, and we will do that however we need to through the use of a blended workforce mix.
DVA advised that a blended workforce was an intrinsic feature of its staffing arrangements. As Mr Harrigan stated:
We will always have a blended work force…
DVA contended there were several reasons why it used a blended workforce, including:
the need for flexibility; and
the requirement to remain within the parameters dictated by the ASL cap.
Mr Harrigan explained:
Firstly, we recruit to what we're allowed to under the ASL cap. We know that across certain areas of the department there are significant volumes of work that've built up over recent years. To ensure that we deliver the best possible service to veterans and their families, our way to address that—to get through the claims to a high standard—is to bring the bodies on that we need, the individuals we need, who we can accredit to get the work done. Whether they be taking phone calls from veterans, whether they be processing claims from veterans, our focus is on addressing the workloads, getting through the backlogs, and that has necessitated a need to supplement our APS workforce with a non-APS workforce. That's our focus.
The 2021–22 Budget allowed for 447 additional ASL positions to be allocated to DVA in order to 'help improve the efficiency of veterans' service delivery'.
DVA acknowledged it was 'greatly appreciative' of the additional ASL increase provided for in the 2021–22 Budget. However, it clarified for the committee that while the increase to its ASL cap was over the forward estimates for four years, the funding allocated was only for two years.
DVA advised at a public hearing in July 2021 that it was using this funding to create non-ongoing APS positions. For example, it outlined that up to 30 June 2021 it had converted 195 labour hire staff to non-ongoing APS staff, and that going forward there was a program (through two other client service divisions) to convert approximately another 120 into non-ongoing APS staff.
Mr Harrigan provided the committee with further detail on how DVA was incorporating the uplift in ASL:
As you've indicated, the department received an increase to its ASL cap in the current financial year of 447 ASL. Our focus at the moment is on making available permanent ongoing positions and non-ongoing positions across the department, and that includes making the opportunity available to non-APS workforce who have worked for the department for some time. The majority of the additional ASL that the department received will go to claims processing and client programs. That work is well underway…
In addition to the focus on claims processing, DVA advised that other client programs would benefit from the increased ASL, including the rehabilitation programs and the case coordination and complex case coordination areas.
When queried by the committee on the temporary nature of the additional ASL funding, DVA advised that it would 'go back to government in future budgets to look at that issue'.
The committee questioned DVA as to whether, in the context of budget discussions, it had made representations to government about an increase to its ASL cap in light of the growing DVA workload.
Mr Harrigan responded with DVA's position:
Through the budget process, we have been in discussions for several years now with government about the emerging workloads of the department, particularly in our claims processing areas. To the extent that we think we need supplementation for the workforce in that area, we will put forward a submission that seeks to obtain additional supplementation to allow us to complete those claims as quickly and as accurately as we can.
When pressed by the committee as to whether 'additional supplementation' meant an addition to the ASL cap, Mr Harrigan responded:
To the extent that the budget proposal we put forward asks for more money for our workforce, our preference has been for an addition to our APS work force.
DVA emphasised to the committee that any changes to the ASL cap were a matter for government. Officials noted that DVA needed to comply with funding parameters and the ASL cap, and that it was open to the government to make different arrangements in future budgets.
In conclusion, DVA noted that despite the temporary increase in ASL allocation in the 2021–22 Budget, it would continue to operate a blended workforce into the future, given its need for workforce flexibility.
Mr Harrigan explained:
We're pleased that we have received some ASL cap relief that will allow us to reduce some of our reliance on labour hire and our non-APS workforce. However, particularly in the area of claims processing, where there is not the certainty that we would like in an ideal world, claims processing and claims volumes are uncertain. For as long as that's the case, we need some flexibility in our workforce in that area. We have always had a flexible, blended workforce—a mix of APS and non-APS—and we will continue to, but the budget has allowed us to reduce some reliance on labour hire and fill some additional Public Service roles, and that includes in claims processing.
The challenges of a blended workforce
The CPSU argued that a reduction in permanent APS staffing levels in DVA since 2013 and the corresponding increase in temporary labour contracting arrangements diminished departmental capability and led to poor service outcomes.
Specifically, it stated that high claim and client numbers, combined with lower APS staffing levels and an 'explosion' in labour hire arrangements had led to:
unsustainable caseloads for staff;
poor job security for large numbers of the DVA workforce;
a reduction in productivity due to the constant diversion of resources for training purposes.
As Ms Donnelly, the CPSU National Secretary, summarised:
The high workloads, combined with the lack of job security for labour hire staff, result in a revolving door, with high turnover, loss of corporate knowledge and lots of resources being deployed to train new, incoming labour hire staff.
The CPSU drew the committee's attention to the challenges inherent in dealing with increased case numbers with consistently inadequate staffing levels:
Since 2013, we've seen DVA client numbers grow, ongoing staff fall by 379, and an explosion in the use of labour hire arrangements. At the same time, there has been a significant increase in claims, case loads and backlogs. The current number of 323,000 clients is significantly above previous forecasts of 250,000. With 700,000 veterans in the community and, as result of Veteran Centric Reform, greater emphasis on and support for veterans to make claims—which is obviously the right thing to do—it's no surprise that workloads and case loads are ever increasing. DVA reports that Military Rehabilitation and Compensation Act liability claims have more than trebled in the past three years, and permanent impairment claims have doubled over that same period.
The CPSU detailed the difficulties caused by a blended workforce with so many staff engaged as labour hire contractors. These included:
Confusion in navigating the different workplace conditions (e.g. leave entitlements) between staff.
Labour hire staff being frightened to raise concerns about high workloads, given their lack of job security.
Labour hire staff not having access to the DVA EAP (employee assistance program).
As CPSU DVA workplace delegate Ms Fiona Duffy explained:
There's a bit of an us-and-them about the labour hire staff. It's a struggle to manage that….Some teams are fifty-fifty or more labour hire, and it is a bit like two different classes of staff, no matter how hard we try to manage that.
The CPSU highlighted that one of the key problems with the large number of labour hire workers was the constant need to train new workers in response to high staff turnover stemming from the lack of job security.
Ms Duffy outlined the diversion of resources required and the associated negative impact on productivity:
……we're constantly training and losing people and training and losing people. Because we can't offer them any security and people are leaving, we're spending a huge amount of time and resources training people, and it actually has a negative impact on productivity.
Senior delegates are offline constantly to train and support people, and then people are leaving. By the time they get skilled they're leaving, or they're leaving beforehand, and then we have to start training all over again. So it's a circular sort of problem, and that has as big an impact on productivity as anything else.
Ms Duffy emphasised that the ongoing churn of labour hire workers and the time it took to train new individuals did not allow for the backlog of veteran claims to be efficiently addressed:
It takes six to 12 months for a claims delegate to learn the legislation, and we lose about a quarter of all labour hire in the first six months anyway. We're constantly fighting to keep staff. The good staff move off to permanent jobs, so it doesn't really have the impact on the backlog that you would hope. Just throwing more labour hire at it isn't necessarily going to get through the claims because of the cost on the ground of having to manage a large cohort of labour hire in the claims space.
Related to this issue, CPSU representatives noted that a compounding factor was the level of mentoring and formal training required to get new workers up to speed, given the complexity of the three pieces of legislation that workers had to be familiar with.
The CPSU also questioned the value for money being achieved by the reliance on labour hire workers, given that the arrangements cost more than directly engaging APS staff. It stated:
DVA admitted in March this year that labour hire can cost 15 to 20 per cent more, on average, than permanent staff.
Impact on service delivery for veterans
The CPSU submitted that the excessively high caseloads and lack of staff contributed to delays in claims processing, which led to frustration and anxiety for veterans.
The CPSU asserted that a 'direct line' could be drawn between the use of labour hire by DVA and increased waiting times and reduced services for veterans.
For example, Ms Donnelly described the impact of the blended workforce model on veterans as 'disastrous' and made particular reference to the long waiting times veterans faced to have their compensation claims allocated and processed.
In making this point, the CPSU referenced the poor mental health facing many veterans in Australia as reported in the media, and pointed to research commissioned by DVA showing that delays to processing compensation claims directly impacted the mental health of claimants.
The CPSU noted that the Australian Veteran's Recognition (Putting Veterans and the Families First) Act 2019 includes a commitment that claims made under the Military Rehabilitation and Compensation Act 2004 (often known as MRCA) be decided within 90 days from when the claim is received, or within 90 days of any requested information being provided.
The CPSU cited discussions during Senate estimates proceedings in March 2021 where it was put to DVA that the average processing time for MRCA Initial Liability claims was 178 days, and 186 days for Permanent Impairment claims.
Evidence from DVA in May 2021 set out the processing times for claims for the six month period 1 July 2020 to 31 December 2020:
Table 3.1: Median and average time taken to process claims - 1 July 2020 to 31 December 2020
MRCA Permanent Impairment
Source: Department of Veterans' Affairs, answer to question on notice, question no. 398 (portfolio question no. 19), Senate Foreign Affairs and Trade Legislation Committee Additional Estimates 2020–21, 24 March 2021 (received 5 May 2021).
Additionally, updated evidence from DVA in October 2021 set out the processing times for the period 1 July 2020 to 31 March 2021:
Table 3.2: Median and average time taken to process claims - 1 July 2020 to 31 March 2021
MRCA Permanent Impairment
Source: Department of Veterans' Affairs, answer to question on notice, question no. 7 (portfolio question no. 7), Senate Foreign Affairs and Trade Legislation Committee Budget Estimates 2021-22, 2 June 2021 (received 15 October 2021).
In regard to claim processing times, in July 2021 CPSU informed the committee:
…over 4,300 initial liability claims older than a year are yet to be processed. Even then, once a claim is determined, some veterans are waiting up to five months to access payments, due to backlogs and understaffing. In June 2020, last year, there were 44,350 unprocessed claims. By the end of the year, there were nearly 50,000 unprocessed claims.
The CPSU drew attention to the use of labour hire staff within the Coordinated Client Support (CCS) area. CCS is an internal DVA support service provided to 'contemporary veterans and dependants identified as having complex and multiple needs'. The CPSU stated that two thirds of the staff working in CCS were employed on short term labour hire contracts. It emphasised that CCS provides assistance to 'the most vulnerable and complex cases', and due to high staff turnover, veterans must constantly re-tell their story to a new case manager, at the risk of exacerbating their trauma.
In order to gain further insight into the impact on veterans, the committee sought evidence from Defences Families of Australia (DFA) and the Defence Force Welfare Association (DFWA).
Mr Kel Ryan, National President of DFWA, observed that the ex-service community had a stake in the efficient workings of DVA as the department worked to meet the demands of 'an ever-increasing and complex veteran community'.
He stated that DFWA supported the CPSU's submission regarding the unsatisfactory outcomes in DVA service stemming from an overreliance on labour hire staff. He explained:
We view the staffing issue as central to addressing the increasing workload faced by DVA because of the changed notion of a veteran, the general issuance of the white card [Veteran White Card]…and the consequent dramatic increase in the number of injury compensation and related claims for support. It is a wicked problem.
Mr Ryan also drew attention to the need for quality training for the whole DVA workforce. He noted that DFWA had concerns about the quality of training and empathy levels within DVA workforce, an issue 'compounded by the coming in and going out of contract staff'. He elaborated:
It is our view that claims processing will only be improved with a well-trained and stable APS workforce. This demands less reliance on short-term contract staff that require constant supervision.
Mrs Sandi Laaksonen-Sherrin, National Convenor of DFA, reported that her organisation had not had complaints from current serving ADF members and their families regarding processing times of DVA claims. However, she posited that this could be due in part to there potentially being less of an impetus of time for these ADF members, given they remain serving and have stable employment.
The committee is strongly of the view that the ASL cap has led to a systemic overreliance on labour hire arrangements within the APS.
It considers that this widespread and ultimately unnecessary externalisation is eroding workforce capability, does not represent value for money, and is leading to poor service delivery outcomes.
Additionally, the committee is mindful of the impermanence of labour hire arrangements and the impact this has upon workers and their sense of security, including their capacity to get a mortgage and live a normal family life.
Under the ASL policy the government is actively choosing to direct large amounts of public money away from essential services and towards for-profit companies, many of which pay little or no tax in Australia. The committee considers it is not ethical or in the public interest to direct billions of dollars of Commonwealth expenditure in this manner.
While the ASL cap may make the APS appear smaller, it does so at the expense of long-term capability and quality service delivery for Australian communities. The shadow workforce necessitated by an arbitrary, ideologically driven staffing cap is not sustainable or cost-effective.
The committee believes that the APS must end its overreliance on external workforce arrangements and find other ways to be flexible within the funding envelope set out in the Budget, while still building core skills, knowledge, and APS capability.
The committee notes the Jobs and Skills Exchange (JSE) initiative from the Victorian Public Service (VPS). The JSE was established in July 2019 to support an efficient, fair and high-quality public service in Victoria. The single, online platform makes it easier for VPS staff to find internal opportunities and simpler for hiring managers to find talent within the VPS. This approach enhances workforce mobility, skills development and career opportunities within the VPS by plugging capability gaps, developing better career paths and making better use of VPS staff, whether to meet short-term needs and secondments, or for more permanent moves.
The committee is of the opinion that a similar initiative in the APS would reduce red tape barriers to internal secondments and reduce the reliance upon external providers to fill surge requirements with labour hire staff. The GovERP work completed to date provides an important foundation for this type of approach.
During the inquiry it became apparent to the committee that there is a glaring absence of consistent, disaggregated collected on many elements of labour hire arrangements, both at an individual agency level and across the APS.
The committee was alarmed at not only this lack of data, but also at the distinct lack of curiosity shown by agencies in regard to details surrounding their use of labour hire, including the levels of expenditure, the margins charged by providers, and the wages and conditions of workers.
The committee considers it essential that data collection is improved across the APS in order to build a comprehensive picture of labour hire and other forms of externalisation. Radical public transparency on this front is required to ensure that labour hire and other external workforce arrangements are only used when necessary and represent value for money.
The committee recommends that the Australian Government abolish the Average Staffing Level cap and require agencies and departments to manage staffing levels within the funding envelope provided by the Budget.
The committee recommends that the principal mode of employment in the Australian Public Service (APS) be direct, permanent employment. Short term peaks in employment requirements should in the first instance be filled with either the redeployment of permanent staff or the direct employment of APS non-ongoing staff. The use of labour hire should only occur where it is not possible to engage non-ongoing staff directly.
The committee recommends that the Australian Government:
identify where Australian Public Service (APS) work has been contracted out to labour hire companies; and
develop and report on a strategy to return the work to direct APS employment.
The committee recommends that the Australian Public Service Commission examine the Jobs and Skills Exchange initiative in the Victorian Public Service, with a view to establishing a similar initiative in the Australian Public Service.
The committee recommends that the annual employee census conducted by the Australian Public Service Commission ahead of the State of the Service report be expanded to include all labour hire staff who have been engaged on behalf of the Australian Public Service in that calendar year.
The resulting data should be reported in an aggregated and disaggregated format. In addition, labour hire level data should be collated and used to evaluate the performance of individual firms.
The committee recommends that the Australian Public Service Commission collect and publish standardised agency and service-wide data on the Australian Government’s utilisation of contractors, consultants, and labour hire workers.
The committee recommends that the Australian Government require all agencies to disclose:
the contractual arrangements (including pay rates and conditions) of all labour hire workers in their agency; and
the margins charged by each labour hire company they engage.
The committee recommends that the Department of Finance regularly collect and annually publish service-wide expenditure data on contractors, consultants, and labour hire workers, including the cost differential between direct employment and external employment for each role.
The committee recommends that the Australian Government require all agencies to publicly disclose the rates and conditions of Australian Public Service employees, and that this information is drawn to the attention of labour hire staff.
The committee recommends that the Australian Government guarantee that no worker employed on a labour hire, contract or consultancy basis should receive less in their take home pay or overall employment package than an Australian Public Service employee performing comparable work.
The committee recommends that the Australian Government require that there is a limit placed on the number of consecutive fixed-term labour hire contracts an agency can issue for a role, with an overall cap of 12 months. Once this cap has been exceeded, the role must be filled through direct employment in the Australian Public Service, either on an ongoing or non-ongoing basis.
The committee recommends that the Australian Government require agencies to undertake a cost-comparison analysis prior to any engagement of external staff, factoring in both the financial cost and longer-term impacts on agency capacity and capability.
The committee recommends that the Australian Public Service Commission seek advice about whether a conflict of interest arises, or whether it is in the interest of effective procurement consistent with the Commonwealth Procurement Rules, to have the following arrangements:
labour hire employees engaged by agencies that have regulatory oversight over entities that themselves have labour hire arrangements potentially with the same labour hire provider; and
multiple 'shopfront' agencies owned by the same parent company competing for Commonwealth tenders or being on the same Commonwealth panel.