The flip side of fly-in fly-out: the use of 457 visas by smaller firms in the Western Australian resources sector.

Author:Barrett, Rowena
Position::Contributed Article - Report
 
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Abstract

The focus in this article is how the extensive use of fly-in fly-out (FIFO) working arrangements in the Western Australian resources sector has an impact directly and indirectly on smaller firms and their ability to recruit workers in remote locations. We argue that the growth of FIFO working arrangements has disadvantaged smaller resource-sector firms by increasing their employment costs and decreasing their ability to attract skilled workers. As a result, smaller resource-sector firms are recruiting skilled workers on 457 visas to secure their business stability and growth, despite the complexity, costs, and risks involved.

  1. Introduction

    In the WA resources sector, FIFO employment contracts are the core mechanism for engaging employees to work in remote locations (HRSCRA 2013). The increased recruitment needs of the resources sector are reflected in the percentage of employees on FIFO contracts. In 2011,52 percent of 46,800 resources sector employees were employed on FIFO contracts and in 2015, this is expected to grow to 57 per cent of 110,000 workers (CMEWA 2011).

    Researchers are increasingly interested in FIFO working arrangements. FIFO workers are generally paid at levels over and above the relevant industrial award rate (Henry et al. 2013) due to the requirement to work away from home. However, worker retention can be problematic and firms have engaged in a range of practices to decrease employee turnover and increase productivity, notably by increasing pay (AWPA 2012). The shortage of workers and skills has seen increased competitiveness for talent within the sector, which has an impact on employees' expectations of work and salary.

    Given that 85 per cent of workers on FIFO employment contracts support their family (Henry et al. 2013, Molloy and Tan 2008),considerable research has been undertaken on the positive and negative impacts of FIFO working arrangements on employee well-being, work-life balance, lifestyle, and family relationships (Henry et al. 2013, Sibbel 2010, Torkington et al. 2011, Watts 2004). Research has also concentrated on the overuse of FIFO working arrangements by firms that are more concerned about profits than the interests of their employees, their families, and local communities, as well as firms using FIFO working arrangements even though regional communities are in close proximity to mine sites (CFMEU 2011). However, little attention has been given to the impact that FIFO working arrangements have on other smaller resource-sector firms.

    In this article, the focus is on the effect of FIFO working-arrangement practices on smaller firms in sourcing and retaining skilled staff. We provide an overview of the difficulties experienced by smaller firms in recruiting skilled staff. We examine the use of the Temporary Business (Long Stay) Standard Business Sponsorship (Subclass 457) visa (hereafter 457 visa) as an alternative recruitment option for smaller resource-sector firms in Western Australia. The findings of a study of smaller firms in the WA resources sector are reported as are why the employees on 457 visas are employed. We argue that growth of FIFO working arrangements has disadvantaged smaller resource-sector firms by increasing employment costs and decreasing the ability to attract skilled workers. As a result, to secure business stability and growth, smaller resource-sector firms have opted to recruit overseas skilled workers on 457 visas, despite this being a complex, highly formalised, and uncertain process.

  2. Smaller Firms, Human Resource Management and Recruitment

    Effective recruitment and selection practices are an important factor for smaller firms, as every person counts and their performance can have a significant impact on firm performance (Gatewood and Feild 1987). Effective human resource management (HRM) practices can contribute to firm survival, while the means to acquire, allocate, and develop human resources can have an impact on the speed and direction of firm growth (Barrett and Mayson 2007; 2008, Barrett et al. 2008, Baron 2003, Changanti et al. 2002, Heneman et al. 2000, Katz et al. 2000, Mayson and Barrett 2005, Williamson 2000). In growth-oriented firms, in order to sustain growth, effective HRM practices are vital for managing the increased complexity resulting from greater numbers of employees (Barrett and Mayson 2007; 2008, Barrett et al. 2008, Mayson and Barrett, 2005).

    Smaller firms have been noted for ineffective recruitment practices and criticised for inadequacies when compared to larger firms (Barber et al. 1999, Cardon and Tarique 2008, Carroll et al. 1999, De Kok and Uhlaner 2001, Hornsby and Kuratako 2003, Taylor 2006). The McEvoy (1984) study showed that common recruitment methods used by smaller firms were limited to newspaper advertisements and walk-ins, and selection processes confined to completing application forms and face-to-face interviews. Heneman and Berkley (1999) found convenience and cost were major factors in smaller firms' attraction practices, with employers choosing to have direct control over the processes. Other studies of smaller firms found a reliance on word-of-mouth and other informal recruitment processes (Barrett and Mayson 2007, 2008, Carroll et al. 1999, Cassell et al. 2002, Kotey and Slade 2005, Marchington et al. 2003, Mayson and Barrett 2005).

    In smaller firms' recruitment practices, there is a strong desire for 'frt'(Barrett et al. 2007). Informal, convenient, or low-cost practices may be preferred as employers can effectively determine whether potential employees will fit into the firm (Marlow and Patton 1993). However, such practices could result in overlooking a larger pool of potentially suitable recruits if the person employed turns out to be unsuitable (Carroll et al. 1999). Further, as smaller firms grow, networks of family members, referrals, and walkins are eventually exhausted, and there is a need to develop more formal methods for recruiting employees to sustain growth (Mayson and Barrett 2005; 2006, Williamson 2000).

    Smaller firms suffer from 'resource poverty' (Welsh and White 1981, p. 18) where formalised recruitment practices are relatively more costly and time-consuming to implement than in larger firms (McEvoy 1984, Reid et al. 2002). Moreover, their' liability of smallness'(Heneman and Berkley 1999, p. 53) raises unique issues in terms of organisational attractiveness (Cardon and Tarique 2008), or perceived legitimacy as employers (Williamson 2000, Williamson et al. 2002, Williamson and Robinson 2008). Recruitment may be problematic, because smaller firms are 'below the radar' of potential employees (Williamson et al., 2002). Potential employees may perceive smaller firms to be unattractive due to their (real or perceived) inability to match pay rates and work-related benefits of larger firms. Their size may also be perceived as a threat to their viability and, hence, make them unattractive to potential employees (Barber et al. 1999, Ranger-Moore 1997).

    In smaller firms, managerial resources and HRM expertise are unlikely to exist (Barrett and Mayson 2008, Hornsby and Kuratko 2003, Klaas et al. 2000). Although smaller firms may not have the resources to promote themselves, research has shown that effective promotion can have an impact on employees' loyalty (Reda and Dyer 2010).

  3. Western Australia's Resources Sector and the 457 Visa Process

    The Australian economy has maintained an average growth rate of 5.3 per cent over the last decade (ABS 2012), much of it contributed by iron-ore projects feeding China's resources boom (BCA 2012, Eslake 2011, Gruen 2011). In Western Australia, the resources sector has always been an important contributor to the economy and in 2012, the 523 commercial mineral projects operating at 75 mine sites and 65 operating at oil and gas fields (DMP 2013a) collectively employed 105,583 people (DMP 2013a). Importantly, every job in this sector created another three indirect jobs in retail, hospitality, support services, and manufacturing (DMP 2013a).

    In Western Australia, significant new mining--and construction related to mining--projects are in planning or are underway, amounting to some $177 billion worth of projects under construction, with a further $120 billion planned (DMP 2013b). Across Australia (see Table l), significant growth has occurred in the sector during 2011 and 2012, with employment numbers rising by over 20 per cent overall, and in metal-ore mining (predominantly Western Australia) increasing by over 40 per cent. Labour costs have risen generally, but have risen even higher in metal-ore mining.

    In Australia, and particularly Western Australia, there has been much said about the shortage of skilled workers (MCA 2012). The Australian Workforce and Productivity Agency (AWPA 2012) points to ongoing issues related to the supply of skilled workers in the resources sector, particularly fabrication, steel tradespersons, and welders. These pressures are compounded by baby boomers starting to exit the labour market (Salt 2012), and low rates of entry by Generation Y workers (Jockel 2009). Skills shortages need to be dealt with if firms' decline is to be avoided (Healy et al. 2012). Although the AWPA (2012) argued that firms could access labour from declining regional areas and industries for FIFO work practices, this was not supported in the House of Representatives Standing Committee on Regional Australia report (HRSCRA 2013).

    Our study shows that resources-sector firms have generally turned to employing workers on 457 visas to meet their recruitment needs. The 457 visa was introduced into Australian policy in 1996 for the temporary employment of skilled migrants (Oke 2010). It allows employers who cannot source specialist skills from the domestic labour market, to employ overseas workers for nominated skilled positions on the Consolidated Sponsored Occupations List (CSOL) (DIAC 2013a).

    At 31 May 2013, primary 457 visa workers...

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