Content sponsored by ELE Group

Brent Mulholland, managing director of Paraparaumu-based ELE Group outlines the case for labour hire.

Brent Mulholland.
Brent Mulholland.

I have been employed in what is known as the "labour hire industry" for the best part of 16 years. Prior to working in the labour hire space, my first leadership role was as production manager for one of Firth Industries subsidiaries (Dricon Bagging) in 1990, just over 30 years ago. From there I moved into operations management with ADT Securitas and developed a solid career in the security industry for over a decade. In the early part of 2000, I worked with Tyco Services, who at that time owned Armourguard in New Zealand where I was the national business development manager.

Tyco offered me a role as national manager business development for their group in New Zealand. It was a unique business at the time, simply due to the extensive acquisition activity they had embarked on. We had electrical, mechanical, engineering, fire, and security businesses. We even had a company that manufactured signs. We were everywhere.

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So, what does all of this mean?

Well, up to the point of joining the labour hire/recruitment industry in 2004, I had no idea that there existed such an industry anywhere near the scale I would soon start to appreciate – one that was clearly developing momentum with businesses of all shapes and sizes.

I had stumbled upon this business model that at the time was delivering workers in 22- and 48-seater buses and 12-seater vans to literally thousands of businesses nationwide. Not just construction, either, where labour hire is often used; we had workers being delivered to manufacturing sites, distribution centres, production environments, mining operations, power plants, offices, stadiums and so on. You name it, we were there in some shape or form helping businesses get the job done and helping people with meaningful employment.

I was seeing first-hand how labour hire was helping all types of businesses succeed, whether they were small one-man operations or large corporates employing hundreds of people. In my early days with Dricon, I lost track of the number of times our plant was shut down for lengthy periods due to age and associated engineering failures, maintenance or product line switches – and the staff would loiter around, underutilised, and costing the business a small fortune.

Had I known the benefits of labour hire then, I most certainly would have utilised the service for the Dricon workforce and consequently operated the business I ran more efficiently.

The case for labour hire companies

I remember meeting with a senior representative of a major union in Auckland several years back. It was at my request. I was general manager for a company that needed workers, and the union survived on membership contributions from individuals and groups wanting to benefit from collective bargaining and employment support. It felt like there could be a win-win for all stakeholders – including their members who I had hoped, may one day be our workers.

The benefits of labour hire.
The benefits of labour hire.

As I saw it, unions had clients (their members) who were from time to time impacted by redundancies, often experienced in manufacturing environments where it was – and remains to a large extent – more cost-effective to contract the work offshore. To me, it made sense for us to be working more closely: labour hire suppliers work across multiple industries with literally hundreds of clients, so it's easy for us to redeploy people in quick fashion. As a labour hire/recruitment agency, our ability to place people into work which matches their skill set and expectations is what appeals to most clients we work with and those we employ.

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Why do labour hire companies continue to get a bad rap?

Unfortunately, my union meeting did not get the traction I had hoped for. I think it came down to the negative perception that labour suppliers did not treat their people well and tended to exploit worker rights. Either that, or I did an appalling job of convincing them otherwise.

I argued that temporary workers are often on better terms and conditions than they would achieve elsewhere. Why, you ask? Because we know if we look after our workers and offer competitive wages and good conditions, coupled with a great working environment and solid leadership, they will be more likely to stay with us. It's not rocket science!

A few bad eggs tend to spoil the basket

There are other businesspeople who may have had a bad experience with a labour supplier once upon a time – factors like poor skills and experience matches, wrong fit for the organisation and a host of other potential factors causing the individual or business to lose confidence.

I would be the first to admit that unfortunately there are unprofessional and dodgy labour hire operators out there, but equally there are some fantastic and very reputable organisations supporting SMEs and large enterprises in New Zealand every day. No matter your industry, you will experience good operators and not so good ones. Don't consider the entire labour hire industry tainted by a few bad eggs.

Then there are the political objections

Some political parties policies from time to time seem to be anti-labour hire, which I think largely reflects their major constituents' views. This might be why my meeting with the union didn't go so well, or maybe it was just a personality clash.

I'd argue that flexible employment options break long stretches of unemployment, and therefore lift the taxpayer burden. How many businesses would not be able to continue operating without the flexibility and convenience that labour hire suppliers offer? As readers can appreciate, a business failing can mean an increase in unemployment. When many businesses fail – as we're seeing from the devastating impact of Covid-19: you have to ask if there's an industry aside from labour hire that's better positioned to assist with short-to medium-term recovery.

Interest in flexible and more agile work is a global trend

We're sure to see flexible, agile work develop more on the back of Covid-19. Many businesses are finding they can work effectively from almost anywhere in professional sectors such as accounting, legal, IT and administration.

I expect we will also see a greater trend toward outsourcing. Companies will look toward future proofing and mitigating risk, cutting back fixed overheads where they can, developing their operating models and structures to be nimbler and more flexible as they operate under new conditions.

What many will come to appreciate, is labour hire does not just extend to low skilled roles; it is much more sophisticated than that, delivering services from the highest level executive on lease, to professional white collar workers performing a range of skilled and unskilled tasks. Labour supply also covers the trades-based roles that have underpinned our vertical and horizontal construction boom with international skilled migrants for nearly a decade.

Labour hire operators in New Zealand and throughout the world provide opportunities for people of all skill levels, diverse backgrounds, qualifications and preference, access to new careers, continual on job training and upskilling and ultimately the chance to build a career of choice in an industry of choice.

Worker benefits.
Worker benefits.

There's great potential here to kick-start the economy at every level with flexible, skilled talent, and as we've seen, the benefits are many-fold. Ultimately it is labour hire that will help companies deal with ebbs and flows by utilising flexible resourcing to rebuild and ultimately contribute to New Zealand's economic recovery.

The Covid crisis has certainly dealt the economy a blow. But I reckon there's a huge potential to contribute to New Zealand's economic recovery with skilled, flexible labour hire. Let's look at how that could work.

What does a typical business look to do during a major recession and what can we expect?

• Minimise cash burn.

• Cut out non-productive costs.

• Look at current structures and downsizing options.

• Review fixed overheads, finding opportunities to cut operating expenses.

• Adjust trading terms to shorter payment cycles and lean toward risk averse.

• Implement a hiring freeze.

• Re-establish the sinking lid policy.

• Freeze salaries, incentives, and bonuses.

• Sell off non-essential assets to increase working capital or pay down debt.

Then what happens?

• They realise that the world is still rotating, and customers still need their products and services.

• They've let go the people they need to take advantage of a market recovery, albeit an unknown and inconsistent rebound.

• They have now lost the momentum to cope with any significant increase in client orders but understand it is not best practice to turn away good business.

• They become reluctant to take on any new people in the short to medium term, reinforced by the fact that they have recently made people redundant. Employing permanent people within a period (normally six months) from when they were let go creates some legal risk. The challenge is, they need people to get the work done, so who better to turn to than labour hire companies.

• Many businesses experience a dead cat bounce of up to 10 percent and realise they have made deeper restructuring and downsizing cuts than were necessary; at the time it seemed like the safest and smartest option and it probably was.

• It is certainly not just lower paid, lower skilled workers that get the axe. Employers cut some of their highest fixed costs during the initial panic of what might play out in a worst-case scenario, and now find themselves short of capability and capacity in key areas.

• They have accepted there will be compliance gaps and not everything will operate as well as it did pre restructure. There simply is no room for fat in the business.

This is where labour hire companies come into their own.

In a downturn like we're now experiencing, there are literally thousands more people than normal in the market looking for work. Unlike in boom times when it is more difficult to find great workers, and organisations have to look offshore to supplement their needs, the opposite is often true in a recession. You discover fantastically qualified, experienced, capable, and reliable people ultra-eager to prove themselves in a new industry sector if that is what they must do.

Access to new industries.
Access to new industries.

If your business sector has been dramatically impacted, chances are that your competitors are not doing any better than you are and have already let go of some of their great people. This is where labour supply companies come in handy; they can cross-pollinate and deploy people to various companies on an ad-hoc basis. Each business gets what it needs, often the worker is fully employed across multiple companies, particularly where there is no IP conflict. It's a win-win for all parties.

Labour hire helps meet supply and demand

Using labour hire suppliers, businesses and industry quickly discover there are top quality, skilled candidates that have the intellectual capital required to help lift operating performance when the opportunity presents itself. And they can do this while controlling their fixed overheads.

Labour hire suppliers have the benefit of working across many industries, with many clients, continually attracting, employing, and placing great people into all sorts of highly skilled and unskilled roles. In a recession, the job of finding people just got so much easier, so the chances are that when an organisation needs someone for any type of role, for any duration, the labour hire supplier will be able to help in quick time.

Undoubtedly there will still exist a skills gap in certain occupations and employers will need to look offshore to find the right people. Companies like ELE Group – who are accredited with Immigration New Zealand – will continue to support offshore recruitment initiatives in this regard. But, given the current travel and isolation restrictions, and what we have learnt to date, I expect many organisations will be looking hard at their own training and business resilience programmes.

A major benefit of using labour hire organisations is that businesses often do not have to make a commitment for any longer than a day – and sometimes less. The flexible nature of how labour hire companies operate means that businesses can get what they need done with the right person and only pay for what they need at the time. They do not have to worry about going through the bureaucratic, time-consuming channels of approval of setting up a new employee in the system.

Your commitment is only as long - and as much - as you need it to be

Cash flow. We all know how important this is to the survival of any business during tough times. Using a labour hire company, you've now secured a great worker for whatever period of time you need them. Depending on the terms of trade, chances are you won't have to pay until the 20th or even the 30th of the month following invoice. This frees up a business's working capital and allows time for some revenues to start flowing back into the coffers before having to pay out. Just understand it is best practice to pay your bills on or before time if you are using any supplier, as this protects the supply chain and most importantly your organisation's reputation.

So now you have taken on a great worker, or maybe even a team of workers to help out in your business and things are starting to look more positive; you think it might be time to start employing a few more people directly and feel it is safe to do so. Well, guess what – you have just had the benefit of employing a fantastic, productive worker via a labour hire company, and you know what their work ethic and suitability is for your business. You can be confident they'll fit well with your organisation and your culture, and therefore the risk of a poor employment decision is massively reduced. Chances are, it will not be too expensive to pay your labour supplier a small fee to transfer after a set period (normally anywhere from 4 to 6 months from last placement, depending on the terms of trade). That said, there are compounding reasons that would support the continual outsourcing of some roles – talk to your labour hire company about a long-term competitive solution where all parties succeed.