Govt ‘wilfully blind’ on public sector labour hire

Denham Sadler
National Affairs Editor

The federal opposition has accused the government of being “wilfully blind” to the use of labour hire within the public service, amid growing concerns about the over reliance on contractors and the use of multinational tech service providers.

The Finance and Public Administration References Committee is conducting an inquiry into the current capability of the Australian Public Service, and its chair, Labor Senator Tim Ayres, has accused the government of a deliberate lack of transparency over the extent of its reliance on labour hire firms to conduct core public administration.

Appearing before a public hearing of the committee on Monday morning, the Centre for International Corporate Tax Accountability’s Dr Claire Parfitt said the organisation had found it hard to research the use of labour hire within the APS as the government itself doesn’t have data on this.

“The government knows very little about the extent of its labour hire practices or who it is contracting with. If it isn’t able to report on this it’s hard for us to research and feed it back. That’s been a really core problem in researching this area – the government knows very little about its own practices in this regard,” Dr Parfitt told the Senators.

Labour hire people
Labour hire data in government is hard to come by

Senator Ayres said this was a form of “wilful blindness” from the government and departments.

“There is a distinct lack of curiosity about the extent to which these arrangements apply,” Senator Ayres said.

The over-reliance on labour hire and external contractors within the APS has been a central theme to the ongoing inquiry, with numerous submitters raising concerns that this is damaging the expertise and capability of the public sector, and leading to revenue being funnelled offshore by these large multinational firms.

Services Australia, the National Disability Insurance Agency (NDIA) and the Digital Transformation Agency (DTA) in particular have come under the spotlight over their use of external labour hire firms.

“All levels of government in Australia are heavily reliant on labour hire, and in the APS the staffing cap has been integral to that. Annual spending on that is estimated to be at $5 billion per year – that’s 20 per cent of the wage cost of the entire APS,” Dr Parfitt said.

“That’s grown rapidly and without necessary oversight and controls.”

Government labour hire contracts are dominated by a handful of large multinational firms, Dr Parfitt said, and few of these pay any significant levels of taxes in Australia.

While there appears to be several different local labour hire firms contracted by the Commonwealth, many of these are owned by the same foreign multinational parent company.

Prolific federal government contractors HorizonOne, Hoban and Clicks Recruit are all owned by Japanese giant Outsourcing Inc.

“When a department puts out a tender and gets bids from HorizonOne, Hoban and Clicks Recruit, it looks like a competitive market but it’s actually just three bids for the same multinational company,” Dr Parfitt said.

“The government needs a register of multinational ownership so it knows who it is doing business with. We’re concerned that even the oversight measures the government has in place can’t be effective and abided by because the government is not properly informed about who it is contracting with. Almost every department is contracting with the same corporate group but under different names.”

The government should also require all external contractors to report on publicly declared revenues and taxes where they operate, Dr Parfitt said.

Large labour hire firm Randstad does publicly report that it pays no taxes in Australia, but many of its rivals do not even report this figure.

“If Randstad can do it then all comparable labour hire firms should do it,” Dr Parfitt said.

CICTAR called on governments to reduce their reliance on labour hire and hire more permanent employees in the APS.

“[The use of labour hire] undermines the capacity of the APS to deliver the basic requirements for public administration,” Dr Parfitt said.

“It means public money is funnelled into tax havens and that undermines funding for essential services. This is crucially important now given the weight of responsibility on all levels of government in Australia on fighting the pandemic.”

Large global tech firms also commonly receive labour hire contracts from the Commonwealth.

In the space of just a week earlier this month, Ireland-domiciled company Accenture received three labour hire contracts with Services Australia worth a total of $2.5 million over the second half of this year.

Nearly a third of the DTA’s total workforce are temporary labour hire staff, with 112 labour hire and contractors out of a total of 277 people. Between 1 July and 31 December last year, the DTA dished out $14.7 million in labour hire contracts.

In a submission to the APS inquiry, the Community and Public Sector Union (CPSU) said that Services Australia and other departments are being run down by a reliance on labour hire use.

“The CPSU is greatly concerned that capability in the APS has been devastated by years of budget cuts, efficiency dividends, the government’s Average Staffing Level cap and the rapid rise of labour hire, consultants and contractors,” the CPSU submission said.

“In Services Australia, core work has been contracted to private providers driven by commercial intent at a cost of over $1.6 billion to the taxpayer.”

There has been a reduction of 6000 staff at Services Australia over the last seven years, with permanent workers replaced by contractors. The agency’s contracts with labour hire and service delivery partners are worth an estimated $1.6 billion.

Do you know more? Contact James Riley via Email.

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