Tag Archives: Illegal Subcontracting Cleaning

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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.