Rio Tinto contractor conundrum: The new normal in the Pilbara?

In late July Rio Tinto announced plans to change the way it worked.

Along with a complete change in its organisational structure; bringing in new department heads, such as iron ore head Andrew Harding making way for Chris Salisbury; combining some divisions and splitting out others; the miner also implemented a new recruitment protocol for its iron ore operations.

Rio Tinto has announced it will now only hire contract labour for its iron ore operations.

“Iron ore is implementing a new recruitment process that takes account of continuing market volatility,” Rio Tinto said in internal documents.

“The aim is to ensure we closely manage headcount, maintain flexibility and promote internal talent where possible.”

It is understood, as part of this new protocol, all external hires will be filled by Category 1 contractors through the contract service providers Workpac, Skilled, and DT Workforce.

This decision will run across all roles, the miner stating it “will be looking to use contractors for engineering and other professional roles”, with the exception of manager, superintendent and frontline supervisory roles.

However, the miner will make exceptions relating to indigenous employment, trainees, graduates and apprentices.

It went on to state, “The process takes account of specialty roles that require a lot of experience and skills to ensure we do not put any component of the business at risk.”

“The new recruitment process also requires leaders to place a priority on internal talent development by offering acting or secondment arrangements for principal, senior, specialist, advisory, and technical roles.”

A Rio Tinto spokesperson confirmed changes were made by the miner around its iron ore hiring protocols.

Rio-Tinto-2014-financial-report-659525-l_5dd7af1d.jpgUnions immediately slammed the decision.

“The message that is preached by Rio is one of local jobs and supporting the communities that they operate out of,” a union spokesperson said.

“The reality is we don’t see this in practice. Contracting roles are an insecure form of employment and come with lesser wages and conditions than full time roles. This decision does nothing to support local Pilbara communities who are already struggling. The same communities who are providing Rio with record tonnage and profits.”

The impact on the ground

An unnamed worker based in Tom Price called the decision a poor one, both for the workers and the town.

“This decision by Rio Tinto to turn to contractors is worrying,” he told Australian Mining.

“People are scared, there is no security at all.”

Rio Tinto emphasised that current roles will not be affected by the decision, stating “all existing employees will retain their roles within the business” and that no Rio Tinto employees would be made redundant to make way for contractors.

This isn’t the first time Rio Tinto has had this accusation thrown at it.

Last year CFMEU Mining and Energy general secretary Andrew Vickers directly addressed the miner at its AGM, stating that the growing proportion of casual labour hire roles in coal mines was affecting job security, which in turn discouraged workers from speaking up about safety concerns.

“A growing proportion of jobs in coal mines are now filled by labour hire contractors rather than permanent positions – well over a third of jobs in many mines,” Vickers said at the time.

“This is a bad outcome for workers, who have little job security and don’t enjoy the same pay and conditions as permanent employees, but it’s also a disaster for mine safety.

“Contract workers know they could lose their job in an instant if they raise a concern about safety that might impact production and this fear is leading directly to accidents.”

CFMEU members attending the AGM raised statistics from Hunter Valley mines which showed that contract workers, who at the time represented 35 to 40 per cent of the workforce, accounted for 66 per cent of Lost Time Injuries (LTI) over the previous 12 months, approximately double the LTI rate of permanent staff.

“Mining companies like Rio Tinto might like the control they have over a casualised workforce – but it’s a dangerous trend,” Vickers said.

“We urge Rio Tinto to prioritise permanent, secure jobs in all its operations.”

The local worker also raised concerns over safety, stating a contractor workforce is less likely to raise issues of safety for fears it could cost them their jobs.

“The contractors may keep quiet over potential safety issues, because as a contractor you will say nothing, you won’t speak up [if it may risk your job].

“Everything is about the dollar, and it’s the people on the ground, the ones on the bottom, that get hit the most.”

Contractor concerns

Brockman-004.jpgContractors and labour hire supply companies were mixed in their response to Rio Tinto’s decision, speaking to Australian Mining from the sidelines of Diggers & Dealers, they stated that they understood the economic reasoning behind, but by narrowing their worker resource pool to only three providers they are missing out on wider skills.

Barminco CEO Peter Stokes explained more operators are turning to contract workforces as they are able to quickly ramp up, or down, as the operation needs, and can bring new eyes to a site.

“Contractors often have their own fleet and are able to scale quite quickly,” Stokes told Australian Mining.

“Mining companies are also looking at the hunger of contractors to drive their business, and as they often have experience from a number of different sites they can not only bring new eyes to a business, but they also bring what they’ve learned – best practices – from other sites,” he said.

“They see it’s not an us and them, but about working with contractors to bring a new level of productivity.”

Ausdrill COO Andrew Broad agreed with Stokes, telling Australian Mining “we’re seeing no fundamental shift in how contractors are being used”.

“In times of uncertainty such as this, people often leave the industry for more stable work outside of mining, so contractors are brought in to fill these gaps,” Broad said.

He went on to say contractors are also evolving in their offering to work more collaboratively with miners.

“There needs to be flexibility in contractor offerings [if the contractors are to stand out],” he said.

“For instance we are working with junior miners, and instead of the traditional pay structure we have been drilling for equity in the eventual project…it’s about being innovative.”

Hays state regional director Chris Kent also said Rio Tinto’s decision to focus more on contract workforces isn’t remarkably different from what is happening across the rest of the industry.

However, “It is unrealistic Rio think that just three agencies can supply everyone they need, especially when it comes to specialised roles,” Kent told Australian Mining.

“Also, they are limiting their candidate pool to those willing to work on a casual basis through agencies in this current economic climate.

“This will work for unskilled and semi-skilled workers, but when it comes to those with a skilled trade a degree of flexibility will be needed.”

Another mining labour hire firm also questioned the decision, stating that by using just Workpac, DT, and Skilled as preferred contractors Rio Tinto limited itself in its potential pool of workers.

“There’s also the fact that by using contractor labour hire, they’ve got a workforce that is willing to move the moment they get a better contract means they’ll constantly have to fill that gap,” they told Australian Mining.

The price at Tom Price

Mount-Tome-Price.jpgRio Tinto’s push for a casualised workforce seems as though history is repeating itself, but it is not just the workers who are affected by this decision.

There is also expected to be a major impact upon the town, one from which it may take years to recover.

“No one here sees it as a good thing at all, it will devastate the Pilbara. It may take about 12 months for the impact of this decision to be felt, but it will take years for the towns [of Tom Price and Paraburdoo] to recover,” the local worker told Australian Mining.

There is also fears that these contractors – due to the insecurity of their own long term jobs at the site – will decline to move to these regional towns, “It will have a snowball effect, as contractors won’t want to move their family to the town if they can’t be assured of a future at the mines,” the worker said.

However, Rio Tinto has stated it remains committed to the region.

“We remain committed to a full and vibrant town in Tom Price,” Rio Tinto said in an official response to its change in recruitment protocol.

“While we do not have all the answers today [on whether the miner will implement a FIFO contractor workforce for Tom Price], the strategy we use to bring the Category 1 contractors into the business will include a focus on the residential community and keeping our Tom price team members based locally in the Pilbara.”

Is Rio Tinto’s movement merely the first in the industry, with other majors likely to follow suit?

While it will allow the miner to navigate this period of ongoing economic depression and commodity volatility the impacts upon the full time workforce, and more importantly regional towns, are yet to be known.

The fact remains that it does indicate the industry is hiring again, but the days of ‘the company man’ are likely numbered, as mining falls in line with the global casualising of workforces.

The labour hire decision’s impacts will be felt far beyond the company’s grounds, and it must take care as it navigates new, unknown waters in the Pilbara.