Category Archives: Sham Contracting

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Evaluation of Cleaning Tenders

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FM Contract Solutions provides organisations with expert evaluation of cleaning tenders.

Procurement of cleaning services is not as straightforward as it looks and making the wrong choice may expose organisations to unacceptable risk.  Organisations can limit risks by employing expert evaluators to participate in and advise on evaluations of tender responses and interviews with short-listed contractors.

The Australian commercial cleaning industry has a chequered history in compliance with employment laws and obligations under the FairWork Act (2009).  In 2016, the FairWork ombudsman conducted random audits of the cleaning industry and found that 33% of commercial cleaning companies were not paying their employees correctly.  Whilst most companies are compliant, the use of sub-contract and labour-hire business models by those who attempt to flout employment law exposes their clients to significant risk and the Client may be liable to legal action and recovery of unpaid and under-paid wages under the Accessorial Liability provisions of the FairWork Act.

Even large organisations can find their reputation tarnished when their contractors break employment laws.  FairWork Australia conducted a enquiry into the procurement of cleaners for Tasmanian Supermarkets which established widespread and significant underpayments to over 90% of cleaners in Woolworth Tasmanian Supermarkets.   In  2018, the Australian Senate published a report into the Australian Cleaning industry entitled ‘Wage theft? What wage theft‘.  Chapter 3 of this report, entitled ‘The exploitation of cleaners in Woolworths’ supply chain‘, noted that ‘ The FWO report ultimately concluded that Woolworths’ approach to procurement and the oversight of its cleaning contracts contributed to this culture of non-compliance.2′.

Cleaning contractors who utilise business models that maximise profits by underpaying workers have become expert at hiding them from potential and existing clients.   The Senate report noted that ‘there will always be rogue, exploitative operators who choose to function outside of the legal, and most certainly voluntary, compliance frameworks.’

FM Contract Solutions cleaning contract evaluators know the cleaning industry back-to-front.  They understand labour allocations, the relevant awards, contract costings, contract sustainability and the technical and operational aspects of cleaning and can uncover the hidden side of a contractor’s offer.

Don’t risk the reputation of your organisation.  Contact FM Contract Solutions now for an obligation free discussion before you go to contract.


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Risk Management for Cleaning Contracts – Avoid Corporate and Brand Damage

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It is critical that Corporations and Organisations develop strict criteria for Risk Management for cleaning contracts, whether they are existing or new contract arrangements.  FM Contract Solutions can help mitigate risk with expert consultancy in all areas of cleaning contract development, evaluation and PerformRisk management for Cleaning Contractsance management.

The Australian Cleaning Industry is largely unregulated and procurement of cleaning services can expose reputable organisations to significant Corporate risk and Brand damage.  The major risk is sham contracting arrangements that attempt to bypass employee entitlements, workers compensation insurances and state Payroll taxes in order to undercut competitors and to maximise profits.  When these arrangements are exposed both the cleaning company and, by implication, their customer can be named and shamed in the press and in Union and Fair Work Commission actions.  Companies that procure cleaning are procuring labour. Labour costs are regulated by the Fair Work Australia and the Modern Award.

A recent press report  http://www.abc.net.au/news/2017-04-27/hsu-accuses-cleaning-company-of-exploiting-workers/8473612  highlights the risk.  Another recent case created negative publicity for a major Retail organisation.  https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/may-2016/20160530-pioneer-personnel-litigation.   in 2015, Fair Work Australia reported that ‘1212 employees – including young workers, overseas workers and students – were found to have been short-changed almost $763,000.’  In 2016, an Audit of 54 Cleaning Service providers by Fair Work Australia found that 33 per cent of cleaning businesses were paying their workers incorrectly.

This is only the tip of the iceberg.  Reports in the media indicate that illegal sub-contracting is rife in Victorian Government schools with ‘Thirty-two Percent (of Cleaners..sic) are not being paid for their work and nearly one in five workers were working at schools and denied basic entitlements such as sick leave, annual leave and superannuation.’  As declared wages and entitlements form the basis for State Payroll tax then the unwritten implications are that Victorian Government may also be missing out on significant tax income in the form of State payroll tax, which is levied at 4.85% on businesses with combined Australian wages over $575,000 (YE June 2017).  This situation could have been avoided if Governments followed their own procurement guidelines and introduced stringent specifications into cleaning contracts and applied Performance Management principles to managing contract compliance and measuring and obtaining Value for Money.

Companies and Organisations that procure cleaning are procuring labour.  Labour costs are regulated by the Fair Work Australia and the Modern Award. The award rate for a Part Time Cleaner working between 6 pm and 6 am on a weekday is $24.57 per hour. When you add on Employee overheads including Holiday pay, sick pay, Long Service leave, Superannuation, Insurances, payroll tax, Operational Expenses and profit, the minimum cost for cleaning services is around $42 per hour plus GST.  If your organisation is paying less than this for outsourced after-hours cleaning services then there is cause for concern.

Contact FM Contract Solutions for expert assistance in procuring and Performance Management of Contract Cleaning Services.