Why labour hire seems expensive, but isn’t.
By Daniel Green.
An honest look into where your labour hire dollar goes.
If hired labour is new to you then you may experience quite a shock when you hear the hourly rate – this is without taking into account overtime rates or any allowances expected by today’s construction worker. With legions of labour hire providers, innumerable industry awards and acres of allowances, how can you make sure you’re getting the best deal you can without falling victim to industrial relations trouble?
Let’s be brutally honest. In the current market, a good general labourer with a white card and some site experience will cost in the region of $43 – $45/h base rate plus penalties plus travel plus meals. You can factor about $20/d for travel and about $20/d for meals after 9.5h. Next to the $30/h you pay your best labourer Sarah that $43/h is looking pretty terrible isn’t it. But what if there were some hidden costs to your own operation that you’re not alive to? And what if there are some costs that your labour hirer has taken care of that you’re also not living up to? Let’s break it down.
SWP’s. These are costs that are on top of your employees gross hourly rate and are required by law. They are: Superannuation, Worker’s Compensation, Public Liability Insurance and depending on the size of the business – Payroll Tax. Collectively, SWP’s are approximately 20% on top of the worker’s gross hourly rate [Super alone is 9%] so now Sarah’s $30/h is more like $36/h.
Overheads. Your business has overheads and so it must be expected that the labour hirer does too. Things like staff wages, rent, inductions and PPE. These can range anywhere from 10% – 20%, so now Sarah’s $36/h is more like $40/h – $43/h.
Recruitment costs. Throwing an ad on Gumtree and chatting to a few blokes only takes a minute, right? On the basis that you only get out of something what you put into it, this will probably not yield the best results. Plus, a solid HR unit may know a thing or two you don’t. For blue collar workers, professional recruitment costs in the zone of $5k each. If you keep that worker for 12 months on a 40 hour week then that $5k costs 2.5h a day. Even at Sarah’s $30/h this is still $75/d or almost $10/h.
The costs can add up very quickly. This doesn’t take into account the tiny profit margins that labour hire businesses generally operate on. The extra cost of an inflexible workforce. Any owed redundancies should things not work out. Industrial action if you’re not Building Code 2016 compliant or you’re paying workers under the wrong award. Or the intangible costs your local labour hirer has. Like the years of trial and error to refine their recruitment processes. The skill of the interviewer to sort the wheat from the chaff. Or the cost to VOC candidates [excavator operators, boilermakers, electricians, riggers etc]. We haven’t even broached tickets and training, or online portal subscriptions like Blue Glue and the RIW system. We’ve merely scratched the surface.
So while it may appear that labour hire is expensive, much like that building you’re erecting, there’s far more to it than just pushing a bit of concrete around and laying a few bricks. And in 2020, with so much uncertainty afoot, with such a transient workforce – labour hire may not just be the best solution for your business. It may be the only one.