Labour hire under pressure: Preserving jobs and business value through restructuring
Labour hire under pressure: Preserving jobs and business value through restructuring
Labour hire and workforce services businesses play an important role across the Australian economy, supporting organisations with flexible workforce solutions across a range of industries.
The sector can also face a challenging combination of financial and operational pressures. Relatively thin margins, substantial payroll obligations and the timing gap between paying workers and collecting customer invoices can place pressure on working capital. When combined with rising employment costs, workers compensation exposure or declining profitability, liquidity can deteriorate quickly.
For businesses with an otherwise viable operating model, early intervention can help preserve the value that remains, including employees, customer relationships and the underlying operational platform.
Recent restructuring activity in the sector demonstrates how voluntary administration can provide a pathway to preserve those assets and achieve a better outcome for stakeholders.
Why labour hire businesses can be particularly exposed
The labour hire model presents a distinct risk profile. Businesses typically need to meet significant and recurring payroll obligations before customer invoices are collected, making disciplined cash flow and working capital management particularly important.
Workplace health and safety and workers compensation exposures can create further complexity, particularly where employees are working across third-party sites. A workplace incident or claims experience can result in substantial additional costs and increases in workers compensation premiums.
These pressures can become particularly acute where a business is already operating on tight margins or experiencing reduced profitability.
For directors and management teams, understanding these risks and responding to early signs of financial pressure can create more options to stabilise the business before value begins to deteriorate.
Restructuring as a pathway to preserve value
Where the underlying business remains viable, restructuring can provide an opportunity to address financial pressure while maintaining business continuity.
A recent example is Momentum Consulting Group, a labour hire business employing more than 800 casual workers across Australia.
When Jeff Marsden and Duncan Clubb were appointed Voluntary Administrators in March 2026, Momentum was experiencing working capital constraints, declining profitability and a workers compensation premium adjustment of approximately $3.2 million.
Despite these challenges, the business retained its customer base, management team and workforce.
The Administrators continued trading the business while undertaking an accelerated restructuring and sale process. Maintaining continuity was particularly important. Disruption to service delivery risked affecting customer relationships and workforce availability, potentially eroding the value of the business.
The process involved engagement with employees, customers, insurers, financiers and key suppliers, alongside a structured recapitalisation process that generated competing proposals.
Ultimately, creditors approved a Deed of Company Arrangement (DOCA) proposed by another labour hire business, allowing the business to continue trading under new ownership while addressing creditor claims through the DOCA.
The restructuring preserved employment and customer relationships and delivered a better outcome for creditors than was expected under a liquidation scenario.
What this means for the sector
The Momentum case study demonstrates a broader point for labour hire and workforce services businesses - financial distress does not necessarily mean the underlying business is unviable.
Where there is an established customer base, workforce and operating platform, acting early may provide more opportunity to stabilise operations, attract new capital or ownership, and preserve value.
For labour hire businesses experiencing financial pressure, some of the areas requiring particular attention include:
- Working capital and short-term liquidity
- Payroll and employment-related obligations
- Margin pressure and customer profitability
- Workers compensation costs and claims
- Customer concentration and continuity
- Engagement with financiers, insurers and other key stakeholders.
Voluntary administration is one restructuring mechanism available when financial pressure becomes more acute. As the Momentum example demonstrates, a structured process can create the time and framework needed to assess recapitalisation, sale or restructuring options while seeking to preserve the underlying business.
How BDO can help
BDO’s business restructuring team works with directors, lenders and investors to assess restructuring options and develop practical pathways for businesses experiencing financial distress.
Whether the objective is a turnaround, recapitalisation, sale process or formal insolvency appointment, seeking advice early can help preserve value and maximise the options available.
