👉 Background: Commonwealth Bank (CBA) is not just Australia’s largest bank, it’s Australia’s largest listed company valued at ~$305 billion. To put that into perspective, its market value is nearly as big as Westpac, ANZ and NAB combined.

👉 What happened: Late last week, the Finance Sector Union (FSU) launched legal action against CBA in the Fair Work Commission, alleging that CBA breached its Enterprise Agreement. It made 304 roles in Australia redundant across technology and retail banking, but the FSU claim that CBA is now hiring for near-identical jobs in India.

👉 What else: The FSU alleges this was a cost-cutting exercise masked as redundancy and this violates CBA's Enterprise Agreement. But this one ain’t over because CBA is refuting all the allegations. Nothing like a bit of labour arbitrage for one of Australia’s most profitable companies.

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‍What's the key learning?

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‍💡Labour arbitrage is the practice of capitalising on wage differences between different regions. In other words, hiring workers in lower-cost countries to perform the same tasks for less money.

💡While this can make financial sense for a company’s bottom line, it’s not a great look… especially when the company is public, and is highly profitable. In fact, in the March quarter alone, CBA announced a 6% rise in cash profits to $2.6 billion.

💡CBA's Indian employee count had almost doubled in the last two years from under 2,900 to over 5,600. In CBA’s case, moving jobs to India will likely save them tens of millions of dollars but it also opens them up to huge legal and reputational risks.