Why Australian businesses should consider owning their labour hire workforce capability
Enterprise workforce solutions
For many Australian businesses, labour hire is no longer an occasional solution. It has become a permanent part of workforce planning.
Construction companies, infrastructure businesses, healthcare organisations, disability providers and other labour-intensive businesses can spend hundreds of thousands of dollars each year engaging external labour hire providers.
The question is not simply whether labour hire is necessary. The bigger question is: should your business continue renting that capability from external agencies, or should you own it?
The hidden cost of relying on external labour hire
External labour hire provides flexibility, but that flexibility comes at a cost.
Every worker supplied through an external agency carries an agency margin. When a business has a consistent requirement for temporary, casual or contract workers, those margins can represent a significant annual expense.
There are also less visible costs.
Businesses may become dependent on multiple suppliers, deal with inconsistent candidate quality, spend time managing agency relationships and have limited visibility over their workforce pipeline.
Over several years, the cost of this model can become substantial.
For organisations spending more than $500,000 a year on labour hire, it may be worth looking at the numbers differently.
Instead of asking, “How can we reduce our labour hire costs?”, ask, “What would it look like if we owned the capability ourselves?”
What does workforce ownership mean?
Workforce ownership means establishing an internal labour hire capability that allows your organisation to recruit, onboard, manage and deploy its own temporary workforce.
Rather than relying entirely on external recruitment agencies, the business creates the infrastructure to manage its workforce directly.
This can include:
- Recruitment and candidate sourcing
- Worker onboarding
- Compliance and credential management
- Payroll and timesheet processes
- Workforce technology
- Candidate databases
- Worker engagement
- Reporting and workforce analytics
- Labour hire licensing and compliance
- Operational management
The objective is not simply to create another department.
It is to build a workforce capability that can create greater control, efficiency and long-term value for the organisation.
When does this model make commercial sense?
Not every business needs its own labour hire operation.
However, workforce ownership becomes particularly relevant when an organisation has a recurring need for temporary or casual workers and spends heavily on external agencies.
It may be worth exploring if your business:
- Spends $500,000 or more annually on labour hire
- Uses temporary or casual workers continuously
- Operates across multiple sites or projects
- Regularly experiences workforce shortages
- Uses multiple labour hire suppliers
- Has limited visibility over agency margins
- Expects labour hire requirements to continue for years
Construction businesses, in particular, can be strong candidates because workforce requirements often fluctuate across projects while skilled labour remains critical to delivery.
The opportunity goes beyond cost reduction
Reducing agency expenditure is an important part of the business case, but it should not be the only consideration.
Owning your workforce capability can give your organisation greater control over candidate relationships, workforce data and recruitment processes.
Over time, the capability can also become a strategic asset.
A business that has built a strong candidate network and recruitment infrastructure may be able to respond faster to new projects, reduce dependency on external suppliers and create a more consistent workforce pipeline.
In some models, the capability can even develop into a separate revenue-generating operation by supplying workers to other organisations.
That changes the conversation from simply reducing labour hire expenditure to turning labour hire spend into enterprise value.
Building the capability does not mean starting from scratch
One of the biggest barriers for businesses considering this model is the complexity involved.
Establishing a labour hire operation requires the right structure, licensing, compliance processes, technology, recruitment capability, payroll infrastructure and operational expertise.
This is where a workforce ownership partner can make a significant difference.
Instead of building every component internally, an organisation can work with an experienced partner to assess its current labour hire model, identify the commercial opportunity and establish the infrastructure required to operate its own workforce capability.
The right approach starts with an assessment of current labour hire expenditure, supplier margins, workforce volumes, operating costs and future requirements.
From there, the business can determine whether workforce ownership makes financial and operational sense.
Is your labour hire spend becoming a permanent cost?
If your organisation has spent hundreds of thousands of dollars on labour hire year after year, it is worth looking beyond the next invoice.
Consider what your labour hire expenditure could look like over the next five years.
Then consider what it would mean to own the recruitment, workforce management and labour hire capability behind that expenditure.
For eligible organisations, RecruitArt helps assess the opportunity and build the systems, infrastructure and operational capability required to establish an organisation-owned workforce model.
Stop renting your workforce capability. Own it.