This article appeared in The Australian 4 October 2008 p1, continued on p6
Inside the cleaning industry's dirty little secrets
EVERY Tuesday or Wednesday, the boss's foot soldiers would arrive, carrying $6000 in cash in a manila envelope, down the stairs to the airless basements of Sydney shopping centres.
There, in the rooms where the cleaners kept their supplies, Bob Black would dole out sweaty handfuls of money to his workers -- close to 40 of them who would come in one at a time at the end of their shifts.
``The cleaners on night shift were mostly paid cash in hand,'' he says. Most were Indian nationals studying in Australia, some had worked without a tax file number for years. ``They usually got $12 an hour.''
Until earlier this year, Black (not his real name) was the middle man between wealthy immigrant subcontractors and an army of cleaners who worked graveyard shifts for under-award wages at four of Sydney's major shopping centres.
Industry sources say that illegal subcontracting, long an issue in contract cleaning, is now more widespread than ever, with cleaning companies employing more and more people off the books, while failing to pay income tax, payroll tax, work cover or superannuation.
``It's very common as far as I can see,'' says Harry Ray, managing director of Gardchek Services, a contract cleaning firm on the NSW south coast. ``Most of the supermarket chains seem to be cleaned that way nowadays,'' he says, suggesting that legitimate operators now struggle to compete with firms engaging in illegal subcontracting.
The story Black tells exposes just a few of the cleaning industry's dirty secrets.
Until he quit this year, Black was working for the Glad Group, apparently one of the fastest-growing cleaning companies in Australia.
Owned and founded by Macedonian-born Natajle ``Nick'' Iloski and his wife, Ljubica or ``Lucy'', Glad will have an official turnover of about $80 million this year.
Iloski used to drive a big black Mercedes with tinted windows but now often gets about in a Mercedes convertible. His wife drives a new Maserati.
In December, the couple spent $6million buying a riverfront house in the southern Sydney suburb of Kangaroo Point that had been sold for $10.85 million.
The same luck seems to characterise Iloski's business dealings.
His company operates out of a modest industrial unit in the Sydney suburb of Rockdale but has trophy contracts, such as an estimated $4.8 million cleaning contract for Westfield Bondi Junction, in Sydney's affluent eastern suburbs.
The shopping centre giant recently handed the Glad Group another $10million worth of business -- with contracts for about $3.3million for Westfield Chermside in Brisbane's northern suburbs, $5.6million for Westfield Parramatta in Sydney's western suburbs and $1.5million for Westfield's Sydney Central in the Pitt Street mall in the CBD.
In all, Glad has cleaning contracts for about 80 offices and 90 shopping centres including Sydney's Queen Victoria Building, Imperial Arcade and Skygardens in the CBD, as well as the AMP-owned Macquarie Centre in Sydney's north.
Cleaning so many large sites would mean employing at least 2000 cleaners, according to industry sources. But documents obtained by The Weekend Australian reveal that the Glad Group and Glad Cleaning Service between them insured just 350 employees for workers compensation in 2007-08.
Its contracts with clients such as Westfield, Mirvac and AMP specify that without prior written approval, there must be no subcontracting -- namely that Glad directly employs its cleaners, paying award wages, workers compensation and superannuation.
In reality, say former Glad employees, a significant portion of the work is handled by subcontractors. The companies doing the subcontracting sometimes come and go, leaving less of a paper trail. But several of the same characters have been in Iloski's orbit for years. Indian-born Ravindra Shambanna, who adds to the car showroom aura outside the company's Rockdale offices by driving a Series 6 BMW, is Glad's group general manager (cleaning).
Company documents reveal his wife, Pavithra Viswanath Shambanna, is the director of Pristine Services, the company that as late as last week, was providing subcontracted labour to clean a clutch of shopping centres and office blocks, including the QVB and nearby Galleries Victoria.
Shambanna was also providing the subcontracted labour at the shopping centres where Black doled out the cash. On a few occasions when Shambanna's bagman failed to show up with the cash, the $6000 or so was paid into Black's bank account and he withdrew it before paying the cleaners. It is Shambanna who responds to our questions about the company in an email to The Weekend Australian.
``The Glad Group has a number of subcontracting arrangements and these are only made at any site with prior consultation with our clients. Under no circumstances does the Glad Group pay any employee cash in hand.''
Mirvac owns two of the shopping centres where Black says he paid some cleaners cash in hand.
``Our contracts do not allow subcontracting,'' says Chris Luscombe, general manager of Mirvac Asset Management. ``We have in the past caught one or two contractors subcontracting. They have been sacked on the spot and been off the site by midnight.''
Naturally, clients and their contractors know the costs involved inside-out. ``We know that if someone comes in (with a tender) at below $27 an hour they're probably not going to be able to do the job,'' Luscombe says.
He is reminded that sources have alleged that cleaners on the night shift at Mirvac-owned shopping centres were being paid $12 an hour.
``The difficult thing is how you prove it and how you police it,'' Luscombe says. ``We're paying good money. That means some people may be making more profit without my knowing it.''
That's not to say he has any complaints about Glad. ``At the end of the day I've never found anything to say Glad are doing it,'' he says.
Insiders say Glad is charging Mirvac between $28 and $30 an hour. If a company is doing everything by the book, that would permit only a few dollars profit per hour.
Glad's turnover has risen from over $50 million in 2006-07 to about $80 million in 2007-08. Industry sources say subcontracting is now the only way most cleaning companies can generate decent margins on their turnover.
Iloski, who has a knack for winning over clients, unstintingly wines and dines them. At one of his lavish Christmas parties, held at the Red Rose, a Macedonian club in the southern Sydney suburb of Rockdale, some years ago, Iloski turned up dressed as an Arab sheik and gave the women silver bracelets and the men bottles of Johnny Walker Black Label scotch whisky.
But in an industry people can enter with little more than a mop and bucket, Iloski has also perfected a simple but elegant business model. He wins the contracts and hands them over to managers or area managers, some of whom subcontract through their own companies.
In fact, says Black, subcontracting occurred at every site he supervised, including several Westpac bank branches and the offices of a number of federal Labor MPs in Sydney's west.
He points out that there was no workers compensation coverage for cleaners being paid in cash. ``One woman was injured. She put a workers comp claim in against Glad,'' says Black. ``Glad said, `You're not our employee', and passed it onto the subcontractor. That person said, `You're not an employee at all -- we're paying you cash'.''
Now out of work, the woman may need surgery.
Most of the cleaners Black dealt with were overseas students working more than the allowed 20 hours a week.
``It is very easy to manipulate this vulnerable and often invisible workforce who work in the night,'' says Gardchek's Ray. ``Government departments and large corporations tell you you have to meet all these criteria. But what in fact happens is that the contractor will find subcontractors who sign a piece of paper saying they'll meet these conditions. But they just completely ignore the conditions.''
Meanwhile, the property companies take refuge behind contractual obligations, washing their hands of the matter by saying they expect the contractors and subcontractors to meet all statutory requirements (however low the price of the contract).
Julia Clarke, manager of corporate affairs for the Westfield Group, says: ``We use a number of cleaning contractors for our centres, including Glad Group. They operate under contracts which require them to meet their obligations under workplace laws. It's not unusual for cleaning contractors to engage sub-contractors for specialist functions, like window cleaning for example, and the agreements between Westfield and its contractors allow for this.''
But Westfield has been accused of turning a blind eye to illegal subcontracting in the past. In the NSW parliament in 2002, Ian West, a member of the Legislative Council -- and a former official of the Liquor Hospitality and Miscellaneous Workers' Union -- criticised Westfield after a union organiser found that some cleaners at Westfield Parramatta had not been paid for four weeks.
Clarke tells The Weekend Australian: ``If anyone has information about contractors not complying with these regulations we would welcome this information being brought to our attention.''
We tell her a former cleaner claims as recently as last week cleaners on the night shift at Westfield Bondi Junction were being paid $13 an hour cash in hand. Clarke says the company will look into it, but calls back a little later to say they won't have an answer before we go to press -- more than 24 hours later.