Publication Labour Hire & Contracting Across the ASX100: 5. Company Reporting and Investor Engagement Guide
This report has highlighted general shortcomings in the reporting by ASX100 on their use of labour hire and/or contractor workforces. In almost all cases, the reporting was found to be insufficient to allow investors to identify the employment model used, let alone determine the sustainability of that model and how it contributes to long-term shareholder value.
ACCR notes that this lack of reporting also reflects the absence of indicators in commonly used reporting frameworks, such as the GRI.[1]
ACCR has developed this framework to guide companies on the types of material and materiality-based disclosures that would provide investors with sufficient information to assess their workforce strategy.
Investors should use their ownership rights to engage companies on their disclosures and on the risks and benefits of their workforce strategy. In preparing this guide, ACCR reviewed existing benchmarking and reporting initiatives, and identified indicators that broadly captured the contingent, contractor, or labour hire workforce. Where possible, this guide has sought to extend these initiatives rather than developing entirely new sets of indicators and disclosures.
Understanding the Employment Model
Definitions of labour hire, contractors and/or any other significant segments of the indirect workforce
The boundary of each workforce segment should be clearly defined, and the definition should clearly articulate the level of control the company has over each group of workers.
As identified above, in the cleaning section, suppliers may be included as part of the core workforce, particularly if they perform tasks that are necessary to the daily operations of a company (for example).
In many sectors, it should also include independent contractors delivering core services on behalf of the company.
Groups of workers who are not considered as part of the core workforce and excluded from reporting should be noted, so that investors can assess the validity of these exclusions.
Number of workers, disaggregated according to the definitions provided above and type of contract (e.g. full-time, part-time, casual)
Where indirect workers are higher on a very short-term contractors (e.g. to perform specific tasks), it may be more appropriate to provide an average for the reporting period either as numbers of workers or FTE.
These disclosures are aimed at providing investors with transparent data that gives a clear picture of the employment model used by a company, and the breakdown of the whole workforce (including direct employees and any triangular employment relationships).
Occupational Health and Safety (OHS)
Reporting on safety incidents should be disaggregated by direct hires AND labour hire and/or contractors
At a minimum, companies should provide detail on fatalities, critical incidents and the severity of incidents. These disclosures should be disaggregated by direct hires AND labour hire and/or contractors. If a segment of the workforce is excluded from these disclosures, this should be noted and an explanation given as to why.
Note: in many cases, companies are already recording the number of hours worked by contractors as part of their OHS disclosures. The publication of disaggregated data would therefore not unduly burden them.
Reporting on Occupational Health and Safety Management System (OHSMS) should include specific detail on inclusion on labour hire workers and contractors
This should include information on the OHS induction and training process for labour hire workers and contractors, and if it differs to the process for direct employees.
It should also detail how information is shared between contractors and the host company, and between contractors. In particular, how incidents and lessons learnt are communicated to contractors.
It should detail what due diligence the host company undertakes to audit the safety performance of its contractors.
ACSI has developed a detailed framework for companies and investors on improved health and safety disclosures.[2] ACCR supports this framework, which sets out four key themes underpinning health and safety management, questions for investors to ask to satisfy themselves as to how companies are addressing those themes, and sample qualitative and quantitative disclosures for companies. The above questions are provided as an adjunct to that framework, and are aimed at guiding investors in determining the impact of a company’s employment model on OHS outcomes, and what policies and procedures it has in place to address the particular OHS risks associated with labour hire and/or contractor workforces.
In addition, in high-risk industries, investors may also seek to engage companies on regulatory disclosures, and specifically, whether any of their primary contractors/labour hire agencies received notices for regulatory breaches or penalties, for work on a host company’s site. If their primary contractors/labour hire agencies have received notices, investors should seek to determine what due diligence the host company has taken with respect to those breaches.
Modern Slavery and Labour Exploitation
Host or lead companies with control over a worksite or worksites where a risk of modern slavery has been identified, should outline their “approach to collaboration” with key stakeholders to assess, monitor, mitigate and remediate modern slavery risks
A number of guides have been produced to assist companies to meet their responsibilities under the Modern Slavery Act 2018 (Cth), and develop best practice approaches to addressing modern slavery in their value chains.[3] Each of these guides note that company responses to identified modern slavery risks will depend on the degree of control a company has over a worksite or worksites, the amount of leverage that the company has over a supplier, and the severity of risk in a particular sector and/or supply chain.
As noted above, some Australian companies are exposed to modern slavery risks through their procurement of services in Australia (e.g. cleaning and security), on sites that they control. In these cases, companies should undertake more extensive due diligence. Where the level of control is sufficient, they may be responsible for remediation where adverse human rights impacts are identified.
As discussed in Section Two, host or lead company participation in multi-stakeholder mechanisms or agreements, where workers have an active role in monitoring and assessment, has been identified as necessary to addressing modern slavery risks and responsibilities in high-risk industries.
A Two-Tier Workforce
Benefits provided to direct employees that are not provided to contractors and/or labour hire
GRI indicator 402.02 asks companies to report on “benefits provided to fulltime employees that are not provided to temporary or part-time employees”, with this data to be disaggregated by significant locations of operation. In companies and sectors where there are a significant number of indirect workers employed to perform core operations for a host company (as opposed to specialised tasks), investors should also review how the conditions extended to labour hire workers and contractors compare to direct employees. These conditions include rates of pay, leave provisions, and training opportunities.
Management of Human and Intellectual Capital: Turnover
The turnover rate disaggregated for the direct and indirect workforce
This should note if any segments of the workforce were excluded from reporting and why. For example, contractors were hired on a task or project basis.
AND/OR
Average length of service of fulltime/part-time/contractor workers by type of employment
This should note if any segments of the workforce were excluded from reporting and why. For example, contractors were hired on a task or project basis.
Labour hire and/or contract labour may impact the ability for companies to attract and retain necessary human and intellectual capital. Turnover rates of the permanent workforce can be indicative of corporate stability, and satisfaction (or dissatisfaction) amongst the workforce. They may also indicate structural changes in the organisation.
In the case of labour hire workers and contractors hired on a seasonal or project basis, turnover data may not necessarily be representative of a company’s retention of human capital. However, in cases where labour hire is used to replace large sections of the workforce, where labour hire workers are employed on regular and long term rosters, and/or where a host company contracts out core business operations, turnover rates for the contingent workforce compared to the direct employed workforce would allow investors to assess the sustainability of a company’s chosen employment model and its success in retaining necessary human and intellectual capital.
For these contract types, it may be more appropriate to provide the average length of service by contract type. Alternatively, it may be more appropriate to the percentage of indirect contracts that completed their contract term versus those that ended prior to the completion of the contract.
Workforce Composition: Diversity
Number of workers for materially relevant diversity disclosures, disaggregated by direct/indirect workforce (at a minimum)
Companies report on a wide range of diversity metrics, including gender, race, indigeneity, disability, sexuality. Where this data is provided, it should also be provided for the indirect workforce. Data should specify the segment of the workforce they capture, if significant parts of the workforce are excluded, and if so, why.
Disclose company policies regarding the workforce diversity of suppliers
A number of companies include supplier workforce diversity statistics and policies in their supplier selection criteria.
Workforce diversity measures are now a common part of corporate governance engagement and reporting by Australian listed companies. Investors and other stakeholders, including ACCR, have taken an interest in how companies are reporting on issues including gender diversity, Equal Opportunity Employment, and the recruitment of Indigenous employees. Many companies have been eager to demonstrate their commitment to these issues. For example, through WGEA reporting and awards, Reconciliation Actions Plans (RAPs), and Australian Workforce Equality Index (AWEI).
In order to adequately assess a company’s performance against its stated diversity policies and targets, investors and other stakeholders need to be provided with clear information and data. From a workforce point of view, this means reporting on the company’s entire workforce, not just its direct employees. If company reporting is partial, incomplete or unclear, then investors will be unable to properly assess the extent to which a company is meeting its diversity goals and targets.
ACCR has reviewed a number of existing labour rights benchmarks and ESG frameworks and their suggested reporting metrics for contingent, supplier, contractor, subcontractor and labour hire workforces, including: Committee on Workers’ Capital (CWC) Guidelines for the Evaluation of Workers’ Human Rights and Labour Standards; Corporate Human Rights Benchmark (CHRB); Ethical Trading Initiative (ETI) Base Code; Global Reporting Initiative (GRI); OECD Guidelines for Multinational Enterprises; UN Guiding Principles on Business and Human Rights (UNGPs); UN Principles of Responsible Investment (UNPRI); Workforce Disclosure Initiative (WDI). ↩︎
ACSI, The Future of Health and Safety Reporting: A Framework for Companies, pp. 19–28. ↩︎
ACSI, Modern Slavery, Risks, Rights and Responsibilities, Department of Home Affairs, p. 96. ↩︎
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