Publication Labour Hire & Contracting Across the ASX100: 3. Company Reporting on Labour Hire Across the ASX100
Given the risks and challenges associated with the use of labour hire employment, investors should seek comprehensive disclosures on a company’s entire workforce, including direct employees and labour hire workers, in order to make reasonable judgements about the appropriateness and sustainability of a companies’ employment model. Reporting should be sufficient to allow investors to ask questions about whether a company’s workforce strategy is based on low labour costs or maintaining and developing its human capital, and whether it will deliver long-term value for the company.[1]
ACCR conducted a review of reporting by 19 ASX100 companies with a significant exposure to labour hire or contractor related risks in key sectors identified in this report: mining, construction, and commercial cleaning (property services). The two ASX100 listed contracting companies, CIMIC and Downer, were not included in this analysis as they are not strictly “host companies”. See Appendix for the full list of companies, and Methodology for how companies were selected.
Section Two identified a number of risks associated with the increased use of labour hire and contractors. Improved reporting across a number of key indicators that would allow investors engage companies on the extent to which their employment model exacerbates or mitigates these risks. These indicators are:
- clear definitions of labour hire and/or contractors;
- disaggregated workforce numbers for direct employees and labour hire and/or contractors;
- disaggregated OHS data for direct employees and labour hire and/or contractors;
- disaggregated diversity data for direct employees and labour hire and/or contractors;
- disaggregated turnover data for direct employees and labour hire and/or contractors.
Finding 1: Company disclosure on labour hire and/or contractors is very limited.
Company reporting on labour hire and contract workers is very limited. Very few companies publicly report any information about their use of labour hire and contractors.[2] Of the companies analysed, 8 (or 42%) made no material disclosure about their labour hire and/or contracting workforce in annual reporting documents.
Where companies do disclose, they typically provide only general statistical data, which gives limited insight into a company’s overall employment model and the total make-up of its workforce.
Overall, it is impossible to deduce if and how companies are using labour hire and/or contract workers in their operations, or to make useful comparisons between companies. It is fair to say that in reporting on their workforces, companies are only providing ‘part of the picture’.
Finding 2: Very few companies define what they mean by “contractor” or “labour hire”.
Even where there was some reporting on these issues, it is not clear which part of the workforce was captured in the data, given differences in the terms used, and a lack of clarity about how these terms were defined by each company. Without these definitions, it is impossible to determine whether company disclosures reflect the entirety of a company’s workforce. Only two companies (11%) defined their use of the terms labour hire and/or contractor in their company documents: Rio Tinto and Fortescue.[3]
Rio Tinto (2019, p.83)
Contractor is a person or organisation providing services to an employer at the employer’s workplace in line with agreed specifications, terms and conditions. In the context of our Rio Tinto’s health, safety and environmental standards, we classify contractors in three categories:
- Category 1: Individuals working on temporary contracts within existing operations
- Category 2: Companies or individuals hired for a discrete project which will be carried out in a designated area separate from existing operations
- Category 3: Companies or individuals contracted to carry out specific tasks or provide specified services within existing operations.
Fortescue (2019, p.124)
Labour hire workers are defined as:
Contractors backfilling permanent Fortescue roles and not hired in a service contractor capacity.
Contractors are defined as:
non-Fortescue employees, working with the company to support specific business activities
Each of the categories defined above describe third-party employment relationships. All Rio categories may include workers employed via labour hire arrangements. To complicate matters, while Fortescue does distinguish between contractors and labour hire workers, their definition of contractors could include workers employed through labour hire agencies, as the primary distinction between “contractors” and “labour hire” is determined by their relationship to the permanent workforce not on the type of contract they are employed under.
As these two definitions make clear, company reporting on labour hire and contractors is variable, and may include a range of different employment relationships. Secondly, where companies do not define the terms they are reporting on, the data presented may not reflect the true numbers of workers employed under triangular employment relationships. For example: Fortescue only reports on its labour hire workers (provides a number), but not contractors.
Finding 3: Company reporting on the size of their labour hire and/or contractor workforce is poor.
All 19 companies analysed have operations in Australia. Of these, only 8 (42%) companies reported the total number and/or percentage of contractors and/or labour hire in their Australian operations.
Of the 19 companies analysed, 11 have global operations. Of these, 7 (64%) reported the total number and/or percentage of contractors and/or labour hire in their global operations.
Finding 4: While most companies report some health and safety data, very few provide disaggregated data for their contractor and/or labour hire workforce.
Most companies reported at least some numerical information on health and safety outcomes. ACCR interpreted this very broadly—‘some numerical information’ could include any combination of data on, for the reporting period: numbers of fatalities, All Injury Frequency Rate (AIFR), Total Recordable Injury Frequency Rate (TRIFR), Medically Treated Injury Frequency Rate (MTIFR), ‘near miss’ or High Potential Incident (HPI), injury severity rates, and/or recordable occupational illness rates.
3 of 19 (16%) of companies provided no numerical data at all.
Only 5 of 19 (26%) companies reported any disaggregated OHS data for their labour hire and/or contractor workforce.[4]
Overall, OHS information disclosure varied substantially among companies, and was selective and limited. Companies used inconsistent OHS indicators, and were not clear or forthcoming about why particular indicators were used, or how numbers and percentages had been calculated. As SafeWork Australia has noted, many commonly used indicators, including LTIFR (“Lost Time Injury Frequency Rate”), are not valid or reliable measurements of injury or wellbeing, and tell us little about health and safety risks and controls, or about the frequency or consequences of injuries.[5]
Finding 5: No companies provide turnover data for labour hire or contractors.
ACCR acknowledges the difficulty in providing turnover data for labour hire and contract staff, given that a percentage are employed on short-term contracts to meet very specific and/or fluctuating needs. However, where labour hire is used to replace large sections of the workforce, and where workers are employed on regular and long-term rosters, this data should be available to investors as it would provide better visibility of why workers are employed on repeated fixed term contracts.
NAPF, Where is the workforce in corporate reporting?, London, NAPF, 2015, p. 14 [accessed 6 April 2020]. ↩︎
As part of our engagement, ACCR asked companies if a) they did use labour hire and/or contractors over the reporting period, but did not disclose this in reporting documents; or b) did not use labour hire and/or contractors over the reporting period, and could therefore not be expected to report any information. No company responded to say that they did not use labour hire workers and/or contractors over the reporting period. ↩︎
In their feedback Evolution Mining provided ACCR with definitions for labour hire (staff who are sourced from a labour hire company to carry out specific programs of work and whose work is directed and managed by an Evolution manager) and contractors (staff who work for a subcontracted business who carry out work on behalf of Evolution and whose work is directed and managed by the contractor). ↩︎
Similarly, ACSI found that: “in 2018 only 19% of ASX200 companies disclosed whether contractors were included in their LTIFR or TRIFR (or both) figures. The rest did not disclose contractor injury rates or did not indicate whether contractors were included in their data.” ACSI, The Future of Health and Safety Reporting: A Framework for Companies, p. 16. ↩︎
SafeWork Australia, SafeWork Australia, 2019 [accessed 6 December 2019]. ↩︎
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