Supply Chain Conversation #4: Certification Coverage – “Who’s in; who’s out?”

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In this, the fourth installment in our current series of Supply Chain Conversations, during which RCSA’s CEO, Charles Cameron, has been posing a number of questions about the involvement of workforce services firms in supply chains, we examine the coverage of RCSA’s Certification Program, looking at some non-traditional labour supply arrangements and asking, “Who’s in; who’s out”.

 

CHARLES: Andrew, I have some examples of non-traditional labour supply arrangements in Australia and New Zealand.  Can you describe how, under the RCSA certification model you have devised, each would be covered, if at all?

ANDREW: Certainly.

However, just before we start with the examples, it’s worth noting that there’s an important difference between certification coverage and a certification requirement.

CHARLES: How so? Can you explain?

ANDREW: Well, certification coverage under the RCSA Program is available to any agency that is carrying on business as an ESP, that’s to say an employment services provider. That is so regardless of whether the agency is an RCSA member or not.

CHARLES: So, coverage is really about eligibility to apply for certification.

ANDREW: Yes. And an agency is eligible if it carries on business of supplying:

  • placement services – e.g. a private employment agency;
  • on-hire services – e.g. a labour-hire firm;
  • contract management services – e.g. a master vendor services provider; or
  • workforce contracting services – e.g. a business that undertakes to assemble a workforce for a specific task such as say, harvest or shutdown operations.

All those terms are defined in the RCSA Standard; and we might look at them in some more detail when we are discussing your examples.

Now, whereas coverage is about eligibility to apply for certification; requirement is about imposing responsibility to be certified, or only to acquire services from a certified supplier.

A requirement to be certified arises at the point where someone, be it a government, a client, an industry association or whoever says, in effect, “If you want to supply services to us (or in our supply chain), you must be certified”. There are already lots of examples of that. Just think of all the supply arrangements, where the purchaser insists that its suppliers have to be accredited against ISO or AS/NZS standards.

So, the requirement to be certified is external to the Standard. It is something that arises outside of the Standard; and as part of the regulatory, contractual, or governance environment in which the business is transacted.

You’ll see therefore, that when we’re talking about coverage under the RCSA Program, we’re not talking about a requirement to be certified. That comes from somewhere else. It’s not part of the Standard, itself.

CHARLES: OK. So, can we talk about some of these examples? Does the RCSA Program extend coverage to:

  • A business hiring employees and on-hiring them to work under the general guidance and supervision of a client representative?

ANDREW: Yes. In most circumstances, the business that hires the employees and then on-hires them to work under those arrangements would be an employment services provider within the scope of the on-hire services definition in the Standard.

There are some exceptions for government contracted employment services such as jobactive, Disability Employment Services and so on; because those services are supplied under a contractual arrangement with the government that regulates them quite closely.

Now, the other party in your example is what you’ve called the “client representative”.

CHARLES: Yes.

ANDREW: If that person is the client itself, or its manager or lead hand – that is to say, if the representative is part of the client’s establishment, then – No. The representative doesn’t come within the coverage of the Standard, because the Standard only extends to employment services providers; not to clients who are not ESPs.

However, if the representative comes via a third-party (and you can see how that could happen under some project management arrangements) AND the third-party is an ESP, say a contract management company, then – Yes. The representative, or more precisely, the third-party contract management company is within the coverage of the RCSA Program.

So, you look at the service network and ask, “What services are being supplied here”? And if the network involves one or more employment services, it’s likely that they might all be eligible to apply for certification.

CHARLES: What about:

  • A business that sources and manages ‘labour hire’ firms to supply services to a client, whilst not employing any worker themselves?

ANDREW: Yes. In this instance, they’re supplying employment services and are participating in a service network that involves themselves and the labour-hire firms they are “managing”. They would be covered, because here we’re talking about what would be a contract management company according to the definition in the RCSA Standard.

Basically, that’s a business that undertakes responsibility for managing the performance of obligations under a contract that requires the performance by a worker of work, without undertaking the direct employment or engagement of the worker.

The contract management company, in your example, is managing the performance of the labour-hire firm’s obligations that require them to arrange for workers to attend the client’s site and perform work.

The contract management category covers a wide range of labour supply intermediaries, who are neither labour-hire firms nor private employment agencies. However, there’s an exception if all they are doing is conducting a pure payroll service.

CHARLES: How about:

  • A business that sources candidates for placement with a client (perm placement firm) and does no more.

ANDREW: Yes. That would be a placement firm within the coverage of the Standard.

There’s an exception for government contracted employment services. We’ve already spoken about those. Though, perhaps it’s worth noting that it is the services that are exempted – not the firm that supplies them. So, if you have a firm that is providing placement services both, as a government contracted employment services provider and as a private employment agent, then the services provided as a private employment agent are covered.

There are some exceptions for career development services, which pretty much follow the OECD definition.

There are also some exceptions for model and performer agencies.

CHARLES: Thinking about some of the new disruptive technologies, what about:

  • A business that sources candidates via an online platform and ‘matches’ them with a client, as well as facilitating payment to the worker from the client via an escrow arrangement?

ANDREW: We’ve left them in as placement services.

In deciding to leave them in, we followed the lead given by the UK, when it last reviewed its employment agencies legislation and appeared to accept the REC’s submission that it’s “difficult to differentiate between the online services offered by a range of recruitment businesses these days and then define what would be in and out of scope”.

The fact that the online platform is matching candidates with jobs (or clients) means that they’re doing more than acting as a pure payroll or escrow company. They’re also providing a placement service.

The Standard is technology neutral. So, it wouldn’t make any difference if they were doing that by an on-line platform supported by an algorithm or by face to face interview and shortlisting decision.

CHARLES: And what is the position in the case of:

  • A business that doesn’t define itself as a ‘labour-hire firm’. However, they offer contracting services, 80% of which is a labour cost and the remainder is PPE and supervision?

ANDREW: It doesn’t matter how the business defines itself, or sees itself. We always look at the actual services that are supplied.

Nevertheless, there are some important differences between a labour-hire firm and the type of workforce contracting business that you are describing.

Labour hire services are services, where an ESP arranges for its workers to attend a worksite to perform work for a customer under the customer’s instructions. Typically, the employment services (consisting of arranging the attendance of on-hire of workers) are the primary deliverable for which the ESP is responsible. To emphasise that, the on-hire terms of business often say something like:

“We are not performing the services set out in the assignment description; but only arrange for the attendance of our workers, at your request, to perform the work that you have described in the assignment description.”

On the other hand, Workforce contracting services are services, where an ESP, under a contract which is wholly or principally for the supply of labour, engages or deploys a workforce under its direction to meet the requirements of a contract that requires it to provide other services to the customer. Examples of the other services could be: crop picking or harvesting services; ICT services, catering services, or cleaning services. In these cases, the employment services (engaging or deploying the workforce) are secondary to the result that is to be achieved, which may be that the harvest is brought in, IT support is provided, an event is catered for, or premises are cleaned.

What seems to distinguish workforce contracting from other forms of general contracting (or sub-contracting) is that the cost that is properly attributable to deliverables to be supplied under the contract consists wholly or principally of the supply of labour.

So, in your example, where 80% of the contract price is for labour, the business would be covered as a “workforce contractor” and eligible to apply for certification.

CHARLES: Thank you, Andrew. That brings us to the end of our examples and our last conversation in this series. Where do we go from here?

ANDREW: Well, thank you, Charles. It’s been good to have the opportunity, over the course of the series, to explain the design approach that we’ve adopted in developing the RCSA Certification Program and to explore some of these ideas with you.

The work has to be ongoing; but I think we’ve been able to lay the foundation for a framework that allows us to view employment service networks as supply chain enablers; rather than as a supply chains in themselves, or, more cynically, simply as a means of avoiding responsibilities to workers.

I think also, that we’re starting to see that any design solution to the problem of labour exploitation needs to be a collaborative solution; and it needs to demonstrate empathy towards the needs of all interest-holders and participants. It has to be user-centred and human-centred.

Some of the solutions that seem to be “easy fixes” – such as direct employment – don’t always recognise the needs of the supply chain operations, which they’re intended to support; and can end up detracting from the flexibility and adaptability of the supply chain.

Other solutions – such as those that attempt to impose responsibility on particular supply chain participants – often fail to distinguish (or seem confused about) the cost, benefit, and value of labour; and the direction in which those aspects flow through supply chains.

So, there’s plenty more work that needs to be done there. And then, of course, there’s more work to develop the controls necessary to assure all interest-holders that the system is really working.

Keep watching this space.

 

Andrew C. Wood, Hon FRCSA (Life)

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