Two of the three agencies reviewed have inadequate data on contingent labour

At the time of our review, Industry and Transport had limited capacity to obtain information on contingent labour. Compiling data to report on contingent labour is an onerous task, involving different data sources, which can affect accurate and timely reporting. Staff advised that they sometimes use data from NSW Procurement, which is sourced from recruitment agencies, but they consider it unreliable and difficult to analyse.

Only Education, which has implemented the new software program for managing contingent labour, was able to obtain timely and accurate reports on its contingent workforce. This program is a web-based tool that facilitates the hiring process, timesheet approvals and payment of fees and rates.

Having adequate data to enable agencies to monitor contingent workers is critical. Staff in the two agencies without Contractor Central reported that poor data makes it difficult to check compliance against the prequalification scheme rules. Access to quality data is also important to inform workforce planning decisions. This is discussed further in section 1.2.

Limited monitoring of contingent labour use by agency executive

We found no evidence of routine reporting of contingent labour use to agency executives in two agencies we reviewed. Reports on contingent labour are prepared for the agencies’ executive on an ad-hoc basis. At the time of our review, only Education, by using Contractor Central, provided comprehensive quarterly reports on its use of contingent workforce to agency executive. Industry advised that it plans to introduce monthly reports to the agency executive once Contractor Central is implemented.

Limited executive reporting is influenced by a number of factors, including difficulties obtaining data in a timely way and poor data quality. However, in an environment of increasing use of contingent labour in the public sector, it is important that an agency’s executive monitor the use of contingent labour to ensure it is the best option available to respond to agency business needs.

Some business units monitor their use of contingent labour

Although we found limited monitoring at the executive level, some business units, particularly those that often engage contingent labour, monitor their contingent workforce. The Information Technology Directorate and the Learning Management Business Reform unit within Education regularly monitor their use of contingent labour. This includes holding meetings to discuss the future business needs and tenure of their contingent workforce. Monitoring the use of contingent labour helps managers to assess whether it meets their business unit’s needs.

Data on contingent labour is not used to inform workforce planning

None of the agencies reviewed uses contingent labour data to inform workforce planning at an agency level. We found no evidence of agency-wide analysis of staff capability, how gaps are addressed by contingent workers, and the best labour options to meet business needs.

Our findings are consistent with the PSC’s 2015 ‘State of the Workforce Reform’ report, which found that workforce data and the use of evidence to inform decisions are not well progressed, with few agencies linking workforce data to business data. It also found that staff within agencies were using multiple and unconnected systems to manage workforce information, and that managers were not able to get all the information they would like about their own teams.

Agency level workforce plans are not in place

An agency’s executive is responsible for ensuring that an agency level workforce plan is in place. In the absence of such a plan, many staff view the engagement of contingent labour as a procurement function only. Hiring managers in the agencies we reviewed work directly with procurement staff in engaging contingent labour. To help hiring managers make decisions on the best resource strategy for their business needs, managers need to be informed by an agency level workforce plan. While hiring managers are ultimately accountable for hiring decisions, human resources also has a role to play in terms of providing advice and ensuring compliance with relevant policies.

Industry started implementing a 2016–19 Workforce Planning Strategy which will help inform hiring managers on the best resource strategy for short-term vacancies. In addition, they advised that once Contractor Central is implemented there will be a partnership between procurement and human resources areas.

Business units are undertaking workforce resourcing activities

We found that some business units are improving how they resource and schedule contingent workers within their units. Staff in the Learning Management Business Reform unit in Education advised that they forecast their use of contingent labour based on their forward program. Contractor Central staff then advertise roles as ‘upcoming’ opportunities. The Infrastructure and Services Division in Transport also uses information on the skills and tenure of its existing contingent workforce to fill vacancies in future projects. Workforce resourcing and scheduling allows business units to engage contingent labour more efficiently, ensuring a smooth transition between staff.

As part of Industry’s efforts to reduce its contingent workforce, Business Technology Services (BTS) staff advised that they regularly review their use of contingent labour. Some strategies BTS staff said they use include:

• transitioning contingent labour to permanent positions
• other procurement options, such as the use of consultants
• outsourcing, for example, application development work.

These practices show that focusing on resourcing and scheduling contingent workers has the potential to improve project delivery and reduce business costs.

Limited processes to ensure hiring managers consider all recruitment options with advice from human resources staff

The processes in place to engage contingent labour do not ensure hiring managers obtain the advice of human resources staff when engaging contingent labour. This is important because contingent labour should only be engaged after considering all other recruitment options and the agency level workforce plan. At the time of our review, none of the agencies had an agency level workforce plan in place.

Industry advised that it plans to improve its processes. After Contractor Central is implemented, requests to engage contingent labour for more than the PSC recommended six-month period will be automatically sent to the workforce planning section. Workforce planning staff will then assist hiring managers to evaluate whether contingent labour is the most suitable option. This approach aims to ensure hiring managers engage contingent labour as a last resort.

Staff believe current recruitment processes increase the use of contingent labour

Staff within the agencies we reviewed advised that some hiring managers have been using contingent labour to avoid the recruitment requirements under the NSW Government Sector Employment Act 2013 (GSE Act). This is because staff considered the processes for recruiting temporary employees under the GSE Act, and related instruments, onerous for short-term engagements, particularly for a 12-month appointment. The Government Sector Employment (General) Rules 2014 required that a suitability assessment, comprising an interview and another capability-based assessment, be carried out for temporary employment for less than six months. For a 12-month appointment, managers must carry out an additional capability-based assessment and seek multiple applicants.

The Government Sector Employment (General) Rules 2014 were amended on 1 January 2017 to allow suitability assessments to be carried out for temporary employment up to 12 months without the need to have comparative assessments. This allows hiring managers to first search the market to recruit temporary employees, leaving contingent workers as a last business resourcing option.

‘On-boarding’ process could be strengthened

All agencies reviewed have processes in place to ensure contingent labour can access key systems and resources when they are first hired, also called ‘on-boarding’. This includes:

• IT systems
• building and work areas (e.g. building access, security passes)
• records management and other business software 
• other resources such as computers, workstations, and telephones.

However, these processes could be strengthened. In two of the agencies, their checklists did not identify the specific requirements for engaging contingent labour, citing non-applicable items like probation and staff development. In addition, processes did not always cover important matters like policies on work health and safety, or an agency’s code of conduct. Only Education has put in place some of these requirements specific to contingent workers, such as:

• on-line mandatory induction (e.g. building emergency procedure)
• tour of facilities
• information about key agency policies, rules and regulations
• information about the contingent worker’s role and responsibilities.

If guidelines for contingent labour are in place, hiring managers can then certify that contingent workers have the equipment and information needed for an immediate start.

Risk that agencies are being overcharged when engaging contingent labour

In agencies without Contractor Central, once the decision to engage contingent labour has been made, hiring managers need to have a good understanding of the market rates for a specific job category in order to negotiate a reasonable pay rate. Agencies that introduced Contractor Central may be more likely to get reasonable rates by using a recruitment broker who has specialised market knowledge and is able to benchmark and negotiate pay rates.

There is also evidence that some recruitment agencies have been charging above prequalification scheme fees. NSW Procurement estimates that the government was overcharged $1.3 million in 2015–162. With Contractor Central, the vendor management system automatically adjusts the scheme fees according to contract tenure, reducing the risk of errors.

Arrangements for ‘off-boarding’ vary and could be strengthened

Arrangements to support hiring managers to off-board their contingent workers vary across the agencies reviewed. In Industry, there are no guidelines for off-boarding contingent labour, despite off-boarding being identified a high-risk area in an internal audit. The internal audit found that assets, such as laptops, had been lost, and payments had occurred after contracts had ended.

In the other two agencies, there are guidelines and procedures in place for off-boarding contingent workers. These documents refer to:

• removing access to IT systems and buildings
• returning security passes
• returning departmental equipment
• paying any outstanding fees and rates.

Two agencies’ off-boarding checklists were not specific to contingent labour, but captured all types of employment. This means that hiring managers must know whether or not an item is applicable to a contingent worker. For example, items on procurement authority and flex-time are not applicable to contingent workers.

Better provisions for knowledge transfer are needed

None of the agencies’ off-boarding guidelines provide for knowledge transfer, despite this being identified as a key risk by agency staff. Encouragingly, off-boarding checklists for two business units we spoke to referred to knowledge transfer. For example, the IT division in Education has a checklist that prompts hiring managers to confirm whether contingent workers’ knowledge of IT systems have been transferred to staff.

Ideally, hiring managers should put arrangements in place for knowledge transfer when contingent workers are engaged. This may include, for example, contingent staff and employees working in the same team or ensuring key material is documented. If knowledge is not transferred during the engagement, it is important to ensure that the hiring manager is aware of any potential or outstanding issues when a contingent worker leaves the agency.

Long tenure of contingent workers is an issue in agencies

All three agencies we reviewed hire contingent labour in long-term engagements, i.e. more than the PSC recommended six-month guideline. The maximum tenure of contingent labour varied across agencies from nine to more than 20 years.

Staff advised that contingent workers are engaged for longer than six months in the following circumstances:

• for large capital projects, which often take many years to complete
• for long-term IT projects
• for specialised skills, pending recruitment action
• for positions that were not able to be created permanently due to restrictions in FTE.

In Education and Transport, contingent labour is used for significant capital projects in the information technology or infrastructure areas, where tenure can be more than two years. Our analysis of NSW Procurement data is consistent with the use of contingent labour in these areas. See Exhibit 6. 

No system in place to monitor the performance of contingent workers at an agency level

None of the agencies reviewed could demonstrate that they routinely monitor the performance of their contingent workforce at an agency level. We found no evidence that managers are required to report that services were provided as contracted and within the negotiated timeframe.

One division within Transport has been reporting on the performance of contingent workers to recruitment agencies since 2013 on engagements valued at over $150,000. This division reports on time management, cooperative relations, and submission of invoices and timesheets. However, the division’s evaluation criteria do not relate to the delivery of contractual outputs on time and within budget.

Education has implemented ‘exit surveys’ which ask contingent workers about their experience within the agency. However, these surveys are not mandatory, do not analyse performance against key deliverables, and only occur at the end of an engagement.

We think hiring managers should continually assess contingent workers’ performance by answering questions, such as:

• are contingent workers providing the service as contracted?
• are contingent workers delivering quality services?
• are services being delivered on time and within budget?

This ensures that staff focus on the quality of service. With the implementation of Contractor Central, there is the means to capture agency-wide information on the performance of contingent workers. Data collected from such assessments could provide the basis of performance reports to an agency’s executive. If there is no system in place to monitor the performance of contingent workers, there is a risk that underperformers could be hired by another manager within the agency.

Arrangements for dealing with underperforming contingent workers are in place

We found that arrangements for dealing with underperforming contingent workers are flexible and easy to implement. Managers said they deal with underperforming contingent labour by:

• asking recruitment agencies to talk to the contingent worker about his/her performance 
• replacing contingent workers with another from the recruitment agency
• terminating the contract early.

These approaches enable hiring managers to effectively manage any significant performance issues should they arise.

Some staff believe contingent workers do not need to be ‘managed’

Although arrangements are in place for dealing with underperforming contingent workers, staff reported that hiring managers believe that they do not need to ‘manage’ contingent labour because it is a procurement activity.

However, just like for employees, it is important that managers set clear expectations for their contingent workers and monitor performance against these to ensure effective and efficient use of public resources. Otherwise, the longer it takes hiring managers to set expectations and monitor results, the more likely it is that contingent labour will not deliver the services required.

Contractor Central helps staff monitor the performance of recruitment agencies

With the introduction of Contractor Central, Education is better able to monitor the performance of recruitment agencies. Education receives reports on each recruitment agency which includes indicators, such as the number of candidates submitted for jobs, accepted for shortlisting, or selected for a position.

If a recruitment agency’s performance is considered ‘unsatisfactory’, Contractor Central staff submit a report to NSW Procurement. The scheme conditions allow NSW Procurement to temporarily suspend suppliers for confirmed poor performance or for breaching scheme conditions. This means that Education is less likely to hire from recruitment agencies with a history of poor performance.

Contractor Central has the potential to improve value for money

We found that Contractor Central has the potential to improve value for money from an agency’s contingent workforce. Education reported that it has achieved a net saving of $944,600 from August 2015 to May 2016. This is because Contractor Central has helped to ensure:

• better oversight of contingent labour use due to more accurate and reliable data
• better compliance with procurement principles and guidelines
• benchmarking of rates to ensure agencies do not pay above market rates
• streamlined hiring process, which reduce time to hire
• more efficient timesheet approvals.

This is an encouraging outcome. Other agencies should look for similar ways to increase their oversight of contingent labour to help improve value for money.

Education also advised that it is planning to use Contractor Central for other procurement categories, such as the use of consultants where a defined scope of work is required for a project, called ‘statements of work’. This aims to improve oversight of Education’s use of consultants and other contractors.