Changes loom large in Canberra as extent of APS reliance on labour hire and outsourcing revealed

The landscape for recruiters and consultancies servicing the labour force requirements of the Federal Government is set to change dramatically after the Audit of Employment within the Australian Public Service was released late last week by the Department of Finance.

The audit examined the 2021-22 financial year, to analyse how the APS was outsourcing work, and what those arrangements were costing the budget.

The conclusion was that roughly 54,000 full time-equivalent roles were being filled by external workers*, on top of the 144,000 staff directly employed in the APS.

In other words, 27% of the APS workforce are not permanently employed public servants, but rather undertake work for government departments and other government-funded entities (eg National War Memorial, National Recovery and Resiliency Agency etc)  as on-hire workers or employees of labour hire firms, consultancies and other outsourcing companies, the so-called ‘coalition of the billing.’

Data revealed that just over three quarters of the entire expenditure on workforce outsourcing was made by the Defence portfolio (see graph, above), including the Department of Veterans Affairs. In terms of headcount Defence accounted for 34,296 of the total 53,911 outsourced jobs across the APS, 64 per cent of the total number of jobs filled by workers other than public servants.

It’s a cliff-top drop until you get to the next heaviest user of outsourced labour; Social Services, incorporating Services Australia, aka Centrelink, registered 5,429 positions, or 10% of total outsourced APS jobs, but only 5% of total outsourcing expenditure.

Around 52 per cent of external labour FTE workers were outsourced service providers (OSPs) (dominated by Defence) followed by contractors (33.7%), labour hire (12.5%) and consultants (1.8%).

The highest users of labour hire were the Social Services, Health and Industry portfolios.

The most common job families for labour hire were service delivery ($161.4 million for 2,102 roles), ICT and digital solutions ($146 m and 713 roles) and portfolio, program and project management ($123 m and 1,012 roles).

By portfolio, the greatest outlay on labour hire occurred in Social Services ($311.8 million for 2,479 roles), followed by Health ($126 million for 801 roles), then Industry, Science and Resources ($62.7 million for 481 roles)

Public service minister Katy Gallagher used the audit’s results to attack the former LNP Government’s obfuscation around public service numbers during their 11 years in office.

“The Morrison Government maintained its artificial cap on public servant numbers, promoting a mirage of efficiency, but were at the same time spending almost $21 billion of public money on a shadow workforce that was deliberately kept secret,” Gallagher said in statements provided to the media last Friday.

“The Albanese Labor government acknowledges that there is a role for external labour in the APS but, where it is used, it should provide a clear value-add and not simply plug holes created by an ideological obsession to gut the APS,” the Minister continued.

“While the Coalition pretended to cap the size of the public service, they were signing contracts by the billions to outsource work that still had to be done.”

“Scott Morrison and Peter Dutton went to great lengths to trick people into thinking this work could be done with a reduced workforce which [we] now know wasn’t possible,” Gallagher continued.

“Labor is committed to rebuilding the APS, its capability and ensuring that jobs that need to be done are delivered, where appropriate, by public servants.”

The difficulty in rolling back will be in the vast differences between public service salaries and the rates being received by contractors, especially in IT.

During a senate estimates hearing in February, under questioning from ACT senator David Pocock, Services Australia chief information and digital officer Charles McHardie revealed his agency had been paying around $1,300 per day for IT contractors at APS level 5/6 level, roughly the equivalent of $290,000 per annum, after factoring in all forms of leave entitlements.

That’s a gap of around $100k, which has no chance of being bridged in the current climate of fiscal austerity, leaving the public sector bereft of IT capability if it was hardline in exiting ‘overpaid’ IT contractors who declined offers of permanent positions on existing APS salary bands.

Last year’s attempt to rectify this salary gap, by creating a specialist classification for technologists and digital practitioners, was knocked back by the Australian Public Service Hierarchy and Classification Review ending any current-day opportunity to reduce the APS’s reliance on external IT talent.

Although recruitment agencies and consultancies supplying IT talent to the APS can probably breathe a little easier for the time being, it seems that those supplying other workers will have to tighten their belts as temp-to-perm placements accelerate across the forthcoming financial year with little or no fee likely to be payable to the agency supplying the temp.

It’s going to a fascinating couple of years ahead for recruitment agencies with operations Canberra.

*the definition of each category of worker is contained on page 11 of report

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