Contract labour in mining: do savings outweigh safety outcomes?

Researchers from the University of Newcastle and UNSW have highlighted how, in mining, contractor hiring for cost reduction creates safety risks — a finding that has prompted these researchers to call for stronger regulatory oversight. Heather Jackson from the University of Newcastle and Professor Michael Quinlan from UNSW analysed 120 publications — including peer-reviewed articles, government reports and theses — that focused on 65 key studies investigating safety outcomes in mining operations. Titled ‘Contract labour in mining and occupational health and safety: a critical review’, their study spanned both developed and developing economies, with attention on Australia, South Africa, the United States, Türkiye and various South American mining regions.

The rise of the contractor

Jackson and Quinlan, who published their insights in The Economic and Labour Relations Review, note that contracting practices have transformed traditional work arrangements, creating challenges for workforce management and safety. And as part of this transformation we have also seen associated shifts in work practices, such as the increasing use of FIFO (fly-in fly-out) and DIDO (drive-in drive-out) workforces, whereby workers live remotely from the mine rather than a nearby mining town and live in barracks while they are onsite.

These transformations have had impacts beyond simple employment arrangements, leading to a growing shift to ‘hot-bedding’ — a phenomenon analogous to hot-desking among service workers. Hot-bedding, where workers share accommodation on different shifts, has created additional fatigue-management challenges and potential safety risks, with impacts on working hours having emerged as a significant concern. This is evident across the literature, where contract workers have been found to work longer hours.

One study, in fact, showed contractors averaging 65.85 hours compared to direct employees, at 52.40 hours — which was the case in the metalliferous sector, the most pronounced disparity the researchers point to. Resultantly, there is a contractor risk factor for injuries associated with long working hours — a risk compounded by the nature of contract work, which the researchers describe as “dirtier”, and where workers have lower job autonomy, and invoke paternalism from the principal contractor and principal contractor workmates.

The ‘savings’ …

As was supported by the literature, cost reduction remained the primary driver for increased contracting. However, as the researchers argue, the economic rationale proved more complex than surface-level savings suggested. “The primary drivers for this growth are economic. Contract labour is typically paid less than directly engaged mineworkers,” Jackson and Quinlan wrote. “Contractors can be more easily ‘discharged’ in a downturn, and if self-employed will not have access to workers’ compensation or other regulatory entitlements, are less likely to be unionised or to raise complaints on-site.”

Indeed, the wage differential is significant. A 2020 McKell Institute report by Dr Stephen Whelan titled ‘Wage-cutting strategies in the mining industry — the cost to workers and communities’ confirms this, finding that contractors were paid up to $30,000 per year less than direct employees. But crucially, as the researchers point out, these apparent savings often lead to increased costs in other areas, with responsibility for meeting compliance costs distributed unequally, with the majority borne by contractors and exacerbated by competitive tendering processes.

… do they outweigh safety outcomes?

In other words, a dive into the research reveals that market conditions influence safety outcomes through contracting arrangements. Coal prices below $55/tonne, for example, appeared to be associated with increased multiple fatality incidents, the researchers note. The rise of labour hire contractors has clear implications for safety outcomes in Australian mining. In Queensland, for example, the researchers cite an unpublished review of Queensland mining incidents that found six of the seven recent fatalities were contractors and that contractors were involved in nine out of 10 of high-potential incidents.

The researchers argue that the presence of contractors tends to accentuate the clear underlying causes that repeatedly occurred in relation to mine fatalities — the financial pressures on contractors that create cascading effects throughout operations. And when safety incidents do occur, to quote Jackson and Quinlan: “Mining companies identify failure of the contracting company to take responsibility for supervising their employees and ambiguous OHS regulatory responsibilities.”

The need to act

Quinlan, who is Emeritus Professor in the School of Management and Governance at UNSW Business School, said this latest review of the literature highlights an urgent need for governments and regulators to provide more effective oversight of contractor safety in the mining industry. Quinlan added that there is clear evidence in mining jurisdictions like Queensland and Western Australia that contractors are over-represented in mine fatalities, which may help explain why “the incidence/frequency of mine fatalities has not improved, at best, in the past decade or more”.

While Quinlan does acknowledge that the Mining and Energy Union in Queensland has pressed for a more thorough investigation of mine fatalities and known risk factors to enhance mine safety, this latest research seems to add credence to the argument that traditional approaches to contractor management, focused primarily on cost reduction and operational flexibility, could create unforeseen risks and potentially catastrophic outcomes.

Image credit: iStock.com/andresr. Stock image used is for illustrative purposes only.