Contract labour mining safety: hidden costs and business risks
New research examines how cost-cutting through contractor hiring creates unforeseen safety risks and financial liabilities for organisations
The 2024 Grosvenor mine methane explosion in Queensland, which severely burned five workers, demonstrated how contractor management practices can lead to catastrophic outcomes. The Queensland Board of Inquiry discovered that mine operations repeatedly exceeded the facility’s gas drainage capacity, with production pressures overriding safety concerns. The investigation revealed that the predominantly contract workforce felt unable to report safety issues due to job security fears.
The Board of Inquiry identified several failures, including inadequate methane drainage/monitoring, a number of gas exceedances prior to the incident, inadequacies in risk assessment, and weakened problem reporting because of the use of labour hire, according to the authors of a recent research paper which examines the safety risks of using contract labour in the mining industry. Most critically, the investigation found “limited communication between management and the predominantly labour-hire workforce” and noted that workers were “afraid to report issues”.
The incident highlighted how traditional approaches to contractor management, focused primarily on cost reduction and operational flexibility, can create unforeseen risks and potentially catastrophic outcomes, according to a comprehensive review of global research, government reports and incident investigations.
The study, Contract labour in mining and occupational health and safety: A critical review, analysed decades of quantitative and qualitative research across multiple countries and industries. Specifically, the researchers examined 120 publications including peer-reviewed articles, government reports and theses, focusing on 65 key studies that investigated safety outcomes in mining operations. The research spanned developed and developing economies, with particular focus on Australia, South Africa, the United States, Turkey and various South American mining regions.
The Grosvenor incident exemplified broader systemic issues around contractor safety in high-risk industries, according to the study, which was co-authored by Michael Quinlan, Emeritus Professor in the School of Management and Governance at UNSW Business School, and University of Newcastle School of Health Sciences graduate Heather Jackson, whose PhD examined 51 serious mine incidents.
Research reveals contractor safety challenges
Published in the Economic and Labour Relations Review, the research revealed how contracting practices have transformed traditional work arrangements, creating new challenges for workforce management and safety. “The growth of contracting has been associated with other shifts in work practices, including the increasing use of fly-in-fly-out (FIFO) and drive-in-drive-out (DIDO), whereby workers live remotely from the mine rather than a nearby mining town and live in barracks while they are onsite,” the researchers noted.
These changes extended beyond simple employment arrangements, and the researchers said there has been a growing trend to the practice of ‘hot-bedding’ – analogous to hot-desking amongst service workers. This practice, where workers share accommodation on different shifts, created additional fatigue management challenges and potential safety risks.
The impact on working hours emerged as a significant concern. Contract workers were found to work longer hours, with one study showing contractors averaged 65.85 hours compared to direct employees at 52.40 hours. This disparity was even more pronounced in certain sectors, with “contractors worked longer hours (51.86) compared to direct employees (50.12) across the industry, which is largest in the metalliferous sector (65.85 compared with 52.40).”
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The research identified that these extended hours created heightened safety risks. “Being a contractor was a risk factor for injuries associated with long working hours,” the researchers found. This risk was compounded by the nature of contract work, where “contractors perform ‘dirtier’ work, have lower job autonomy, and invoke paternalism from the principal contractor and principal contractor workmates”.
The combination of remote living arrangements and extended working hours created additional pressures on workforce management systems. “The OHSM regime weakened by extensive use of labour hire, especially report back mechanism,” the study noted. This weakness manifested in practical ways, with researchers finding that “contractors were not included in bonus schemes (except on two mines), but direct employees are penalised if a contractor has an incident.”
The business case for change
The research revealed that cost reduction remained the primary driver for increased contracting, though 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. 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," the researchers found.
The wage differential was significant. A McKell Institute report found contractors were paid up to A$30,000 per year less than direct employees. However, these apparent savings often led to increased costs in other areas. The study identified that "responsibility for meeting compliance costs was distributed unequally, with the majority borne by contractors and exacerbated by competitive tendering processes."
The research uncovered how market conditions influenced safety outcomes through contracting arrangements. Coal prices below A$55/tonne appeared to be associated with increased multiple fatality incidents, the researchers noted. They cited an unpublished review of Queensland mining incidents that found "6 of the 7 recent fatalities were contractors and 9 out of 10 of high-potential incidents involved contractors."
The paper also found there were clear underlying causes that repeatedly occurred in relation to mine fatalities, and the presence of contractors tended to accentuate these risk factors identified by the 10 pathways and Pressure, Disorganisation and Regulatory Failure models.
The financial pressures on contractors created cascading effects throughout operations. "Mining companies identify failure of the contracting company to take responsibility for supervising their employees and ambiguous OHS regulatory responsibilities," the study said. This led to situations where "contractor's supervisors have more control, e.g., may ask them to undertake work in an unsafe manner. Subcontractors feel they do not have the power to refuse."
The research highlighted how cost-focused contracting strategies often backfired through increased regulatory scrutiny and incident-related costs. "Notwithstanding oft-repeated phrases such as zero-harm and management systems, the corporate shift to using contractors is primarily driven by cost-cutting and highlights how OHS is compromised by such priorities," the researchers concluded. This finding pointed to the need for organisations to take a more comprehensive view of contractor-related costs, including potential liabilities and reputational damage from safety incidents.
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Creating safer workplaces through better systems
The study identified important ways organisations can improve contractor safety outcomes. A systematic approach to contractor management emerged as critical, with the researchers noting that “requirements for a safer approach to contracting include comprehensive hazard identification and risk assessment, extensive standard operating procedures, rigorous monitoring and auditing, a preference for using specialist contractors, and developing long-term relationships.”
The research highlighted that achieving better safety outcomes requires fundamental changes to how organisations approach contractor management. “The most effective way of improving contractor safety in mines is reducing the use of contractors overall and concentrating their activities in areas such as major shutdowns/repairs, where contractors have specialised expertise to undertake non-routine tasks,” the study said.
Business leaders, especially Boards, need to carefully evaluate where contracting makes strategic sense beyond pure cost considerations. Successful organisations developed long-term partnerships with contractors, invested in comprehensive training and safety systems, and created cultures where contractors felt empowered to report safety concerns without fear of losing work.
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Despite oft-repeated phrases such as zero-harm and management systems, the researchers said the corporate shift to using contractors is primarily driven by cost-cutting and highlights how such priorities compromise OHS. This finding suggests that business leaders need to take a more holistic view of the true costs and benefits of contracting strategies.
“There is also an urgent need for governments and regulators to provide more effective oversight of contractor safety. In mining jurisdictions like Western Australia and Queensland, there is clear evidence contractors are over-represented in mine fatalities, and this may well help explain why the incidence/frequency of mine fatalities has not improved, at best, in the past decade or more,” said Prof. Quinlan, who noted that in Queensland, the Mining and Energy Union is pressing for a more thorough investigation of mine fatalities and known risk factors (including those identified by 10 pathways and pressure, disorganisation and regulatory failure models) to inform more effective measures to enhance mine safety.