Is chasing cheaper labour actually costing you more?

Is chasing cheaper labour actually costing you more?

It is tempting, isn’t it? The budget is tight, orders are piling up, and there’s that agency promising they can get you staff at a rate that looks too good to be true. Spoiler alert: it usually is. What looks like a saving on paper often morphs into a very expensive mistake. In recruitment and labour hire, the race to the bottom is one race you do not want to win.

1. The True Cost of a Bad Hire

In Australia, research shows a bad hire can cost anywhere from 15 to 21 per cent of that worker’s annual salary, while other estimates put it at 30 to 150 per cent once you factor in turnover, retraining, reduced productivity, and the need to re-hire. If you think about it, that “cheap” worker could end up costing the same as hiring two or three people properly in the first place.

2. Safety is Non-Negotiable

Cut-rate labour often means corners are cut in vetting and training. That’s risky business. Safe Work Australia reports more than 1.16 million serious workers’ compensation claims in the past decade. The economy would be $28.6 billion larger every year if workplace injuries and illnesses were eliminated. Workplace accidents do not just hurt people; they hurt profits, reputations, and continuity.

3. False Savings Undermine Productivity

Cheap labour may look fine on the timesheet, but poor work quality, low output, and mistakes mean productivity tumbles. When mistakes happen on the production line or in logistics, it is not just one worker’s error; it is an entire shift slowed down, customer deadlines missed, and goodwill damaged. Short-term savings quickly turn into long-term costs.

Another hidden danger is the integrity of the recruitment process itself. Agencies that undercut on price often cut corners on vetting. Proper interviews, reference checks, and compliance verification may be skipped, meaning workers arrive on site unprepared, unskilled, or even ineligible to work. This doesn’t just affect productivity – it exposes your business to unnecessary risk.

4. Damage to Client and Supplier Relationships

Every manager knows business is built on relationships. If clients experience delays or substandard work because the cheapest staff were put on the job, they remember. Equally, suppliers and regular contractors notice when they are treated like a revolving door. Loyalty and goodwill erode, and suddenly those favours you relied on when the pressure was on are no longer available.

5. High Staff Turnover is Expensive

Labour hire workers who are underpaid or undervalued do not stick around. Employee turnover in Australia can cost up to 90 to 200 per cent of a worker’s annual salary when you consider recruitment, onboarding, and training. Constant churn drains resources, disrupts team cohesion, and leaves you forever plugging holes instead of growing your business.

6. Hidden Costs Multiply

It is not just the obvious expenses. Hidden costs creep in:

· Lost knowledge when experienced temps walk out

· Lower morale among permanent staff carrying the load

· Customer dissatisfaction from inconsistent service

· Increased supervision required for inexperienced workers In other words, the “cheap” hire quietly becomes the most expensive line on your balance sheet.

7. Compliance Risks

Another trap with bargain labour is compliance. From Fair Work requirements to OHS laws, businesses are on the hook for ensuring their labour hire is compliant. Agencies offering cut-price workers may not be paying award wages, may skip mandatory training, or may be non-compliant with licensing. If WorkCover comes knocking, it is your business name sharing the risk.

Equally concerning is the lack of proper background and right-to-work checks. A candidate who hasn’t been thoroughly vetted can put you in breach of your legal obligations. When compliance is compromised in the rush to supply “cheap” staff, it’s your brand – not the agency’s – that ends up exposed.

8. Culture and Reputation Suffer

You cannot build a strong workplace culture on the back of underpaid, undertrained, and undervalued workers. Your permanent staff notice when you bring in “cheap” labour, and it affects their morale and respect for management. Externally, your reputation as an employer of choice and even as a supplier suffers. In tight labour markets, that reputation matters more than ever.

9. Cheap Does Not Scale

Seasonal peaks, public holiday periods, or sudden surges in demand expose weak workforce strategies. If you rely on bargain-basement hires, scaling up becomes chaotic and risky. By contrast, investing in quality, pre-vetted workers means you can scale with confidence, knowing the staff turning up can actually do the job.

10. The Opportunity Cost

Finally, consider what you miss out on. Every hour spent replacing, retraining, or managing fallout from poor hires is time not spent on innovation, client growth, or building a better business. Chasing cheap labour keeps you stuck in a cycle of reacting to problems instead of planning strategically.

The Smarter Path Forward

At Blaze Staffing, we understand the appeal of cutting costs, but we also know the long-term damage it can cause, we have seen this play out on many occasions. Quality staff, who are vetted, trained, skilled and paid correctly, may not be the cheapest option, but they will deliver the best value over time. Fewer safety incidents, higher productivity, stronger client

relationships, and a more engaged workforce are worth far more than a few dollars shaved off an hourly rate.

When you partner with a local Australian-owned agency that understands your industry and prioritises compliance and quality, and service, you are not just filling a shift, you are investing in the future stability and growth of your business.

So, the next time a bargain rate crosses your desk, or you put it out to the market to compare margins, ask yourself: is it really cheaper-or is it just a false economy?

Sources :

Safe Work Australia: Key WHS Statistics 2023 – Safe Work Australia

HCAMag: The cost of rushed recruitment – HCAMag

Employee retention and turnover cost estimates – Employee Retention