In our ‘5 ways in 5 days’ series, we are looking at options to control labour costs which don’t involve implementing redundancies. This article considers:

  • retraining and redeploying employees; and
  • reducing the size of the labour hire workforce.

RETRAINING AND REDEPLOYING EMPLOYEES

While many employers have an admirable focus on training employees so that they can expand their skills and qualifications throughout their career, a downturn in the market can affect the amount that the organisation is prepared to expend on training and skills programs. However, sophisticated employers often see a downturn as an opportunity – when the area in which an employee is working is suffering while others are growing, there can be value in retraining and/or redeploying the employee as a way of retaining high-quality candidates within the organisation. Assessing redeployment opportunities for employees who would otherwise be made redundant has benefits because:

  • doing so can reduce legal risk – in determining whether a there was a ‘genuine redundancy’ the Fair Work Commission will consider whether it was reasonable to redeploy the employee within the corporate group; and
  • moving employees from one area of the organisation to another, following suitable retraining, may avoid the need to incur redundancy costs.

As with the other options we have addressed in our ‘5 ways in 5 days’ series, there are a number of issues to bear in mind:

  • there are likely to be additional training and redeployment expenses – the business needs to weigh up the benefits from retraining and redeployment against those additional costs;
  • employees may resist the change – if an employee’s contract does not permit the employer to redeploy or retrain them, then an employer will ordinarily need the employee’s consent to modify their duties. However, where prospects for the future of the employee’s existing role are diminished, there is an incentive for employees to take up retraining/redeployment opportunities;
  • employers may need to comply with the applicable consultation clause – contained in an enterprise agreement or award if it is proposing to redeploy a large number of staff; and
  • employers should carefully consider the basis on which employees are redeployed - that is, whether it is permanent or temporary. Employees may approach a redeployment on the basis that it is temporary, and that they will return to their ‘old job’ once conditions improve.

REDUCING LABOUR HIRE WORKERS

The use of ‘contractors’ or ‘labour hire workers’ is an increasing trend in Australian business. These arrangements usually involve engaging a labour hire company to provide staff, who often work alongside an organisation’s own employees. The key advantage is that such an arrangement allows an organisation to have some flexibility in its staffing levels – so that peaks and troughs can be managed without the need to incur additional expenses associated with hiring new employees or making severance payments to redundant employees.

Unfortunately flexibility does not come without cost. For instance:

  • labour hire providers make profits by charging a margin on top of the cost to the provider of employing the labour hire worker; and
  • many enterprise agreements contain clauses which require that labour hire workers receive terms and conditions no less favourable than employees of the organisation itself.

Labour hire providers generally require an organisation to enter into a contract for the supply of the labour. Employers should consider the provisions of those contracts before taking steps to reduce the labour hire workforce  – they may contain notice or penalty provisions that apply if an organisation reduces or ceases using labour hire workers before the end of a particular term.