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Tough times continue for Labour Hire

by Helen Flint •
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The 2013-14 Federal Government Labour Hire market continues to trend downward with its lowest first half result in three years and early indications for Q3 show the downward trend is continuing.

According to the most recent Intermedium Labour Hire Report the first half of 2013-14 saw a total contract value (TCV) of $483.0 million.  This is down 11% from $543.3 million in the first half of 2012-13, which itself was a decline of 11% for the same period in 2011-12.  The 2011-12 first half year had a TCV of  $612.6 million.

In effect since the high point in 2011-12, the half year results, have declined by $129.6 million over the last three years.

Early indications are that Q3 will also be down approximately 10% on the 2012-13 Q3, although contracts reporting for the period will not be finalised until mid-May.

The ongoing decline in the value of Labour Hire contracting is occurring against the backdrop of a stagnant Federal Government ICT market, along with the loss of substantial numbers of permanent jobs within the Australian Public Service (APS).

The Federal Government ICT market flatlined in the first half of 2013-14 as agencies await the results of the Commission of Audit Report and the associated impacts on the upcoming 2014-15 Budget.  

Federal Government agencies were already operating under tight financial circumstances when the election of the new Coalition Abbott Government in September 2013 brought the prospect of another round of belt-tightening.

Typically ICT contractors are brought in to meet a temporary skills requirement, frequently as part of an ICT project. This can be seen as the top ranked agencies in the Labour Hire market are agencies with substantial ICT funding and major ICT projects underway.

Together the following top three agencies accounted for approximately 40% of Labour Hire TCV for the full year 2012-13:

  1. Department of Immigration and Citizenship (now Department of Immigration and Border Protection) with a Labour Hire TCV $131.7 million which was undertaking a major Client Services Transformation.
  2. Department of Human Services with a Labour Hire TCV $125.6 million has been undertaking Service Delivery Reform and has plans for further systems development into the future.
  3. Australian Taxation Office with a Labour Hire TCV $56.5 million is responsible for the SuperStream program.

The previous Labor Government had imposed a one off increase in the public service efficiency dividend to 4% for the 2012-13 year and had also announced a higher than usual efficiency dividend of 2.25% for the coming years in a bid to save $1.8 billion over three years from 2014‑15 to 2016‑17, triggering job losses within agencies which had exhausted other avenues to trim costs.

Following the election the new Coalition Government swiftly took action on implementing two of its key election promises.

In October the Government announced the commencement of a National Commission of Audit to “assess the role and scope of Government, as well as ensuring taxpayers’ money is spent wisely and in an efficient manner.”

The final report of the National Commission of Audit was due to Government by the end of March and the Commission ceased on 31 March 2014. The outcomes from the Commission of Audit are likely to have far reaching implications for all areas of Government operations including impacts on ICT functions.

Also in October the Government announced an external employment freeze “to help meet the Government’s election commitment to reduce the public service by 12,000 employees through natural attrition.”

The Minister assisting the Prime Minister for the Public Service, Senator the Hon. Eric Abetz said “We are asking our public service to look carefully at every position that becomes vacant and ask whether that position is really necessary; or whether there is a better way to do business.”

With the ongoing Government focus on achieving savings the Labour Hire market looks likely to remain under pressure for the foreseeable future. However for the Labour Hire market there may be a silver lining to the current Government drive for savings, as with APS employee positions set to go contractors may be required to fill resulting gaps.

Given the strong relationship between major projects and Labour Hire TCV the upcoming Federal Budget can be expected to shed some light on the future direction of the market as it reveals which agencies, if any, will receive new funding for major ICT projects.

More information on the Labour Hire market can be found on Intermedium's Labour Hire Reports – available for purchase.

 

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Jurisdiction
  • Federal
Category
  • Labour Hire
Sector
  • Finance & Services
  • Policy
Tags
  • Client Services Transformation
  • Coalition government
  • Commission of Audit Report
  • Department of Human Services
  • Department of Immigration and Border Protection
  • efficiency dividend
  • Federal Govenment ICT
  • Labour Hire