How to Start a Labour Hire Company

How to Start a Labour Hire Company

Jul 25, 2022
Reading Time: 7 minutes
Written by Ilyas Omari

Are you thinking about starting your own labour hire company and unsure of where to start? Despite the challenges, labour hire companies are growing in popularity due to the many benefits they provide to employers and employees. 

To help you get your labour hire company up and running we’ve created a detailed guide for you to follow. Read along to know which law governs labour hire companies, whether you need a license, and answers to other frequently asked questions.

What is labour hire?

Labour hire refers to outsourcing workers to work for a third-party host company.

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What is a labour hire company?

A labour hire company refers to a business that provides workers to a client company on an ‘on-hire’ or ‘lease’ basis. This type of employment arrangement differs from the traditional recruitment process which typically involves long-term contracts.

What is a labour hire worker?

Labour hire workers refer to skilled individuals that are contracted by an employment agency ( recruitment agency). Labour hire workers are then assigned to work for host businesses by their employment agency.

Labour hire workers can be assigned to work for a host’s business on a casual, part-time or full-time basis.

Who is in the labour hire employment relationship?

There are three primary parties involved in a labour hire employment relationship, these include:

  1. Labour hire company
  2. Labour hire worker
  3. Host business/ PCBU( person conducting a business or undertaking)

Host businesses will provide a labour hire company with a job description. The labour hire company will then determine whether they have an employee or employees capable of performing the requested task.

What responsibilities do labour hire company employers have?

Labour hire company employers must overlook include the following:

Do you need a labour hire licence for your labour hire company?

Each state has its own law in relation to labour hire companies. Therefore, whether you’ll need a labour hire license depends on the state you plan to operate your business in. The legislation regarding licensing includes the following:

  • South Australia: In South Australia, all businesses that provide workers to a host business are legally required to have a license even if the workers aren’t under the employer or host’ business’s control 

Australian Capital Territory(ACT): The Labour Hire Licensing Act 2020 requires every  labour hire service provider to have a labour hire license

What skills do you need to be a labour hire provider?

You need the following skills to run a successful labour hire company: 

  • You must understand what kind of employees your clients are looking for 
  • Great attention to detail 
  • Time management skills 
  • Patience 
  • Good listening skills
  • Excellent communication skills
  • Excellent relationship-building skills

Possessing these characteristics will ensure that you recruit the right employees for your clients’ needs.

11 Key Tips To Run A Successful Labour Hire Company

1:Differentiate yourself from other labour hire companies

You should try to provide labour hire for different types of businesses. This will make your company appealing to a larger range of clients. Therefore, you’re more likely to succeed and make money. 

Moreover, you’ll receive a competitive advantage over other companies. Clients are more likely to choose a labour hire company that has experience in multiple fields.

2: Establish a mission and vision

It’s important to establish a mission and a vision for your company. Having a goal and objective will make it easier for you to establish a business strategy. 

This will show your clients that you are trustworthy and there to serve them. Additionally, it makes your business seem more genuine and one which will satisfy its clients’ needs.

3: Identifying potential clients

You should identify who you want as your potential clients. Keeping a broad range is more beneficial to your business. However, it might be easier to start small and keep growing. 

Keep in mind that you’re hiring labour for another company. Therefore, who you hire should match the other company’s needs.

4: Analyse your competitors

There are many labour hire companies out there. Therefore, you should study the actions of your competitors. Doing this will help you develop ways of improving and innovating your recruitment services. Using the successes and failures of other labour-hire companies will help you develop your own.

5: Determine the price of your services and the law

Your prices should always reflect the amount of work you do. Clients want to see some value for money. Additionally, they don’t want to feel like they are paying for something they could easily do themselves. 

6: Register your business

You should register your business to increase awareness of your business.

7: Get an Australian Business Number ABN for your business

An ABN will allow your business to be easily identifiable.

8: Choose a business name

You should register a business name as this will assist customers in locating your business and connecting with it. 

9: Trademark your business

You should apply for a trademark to protect your services. 

10: Get insurance 

You should also get an insurance policy for your business in case something goes wrong.

11: Ensure your business has a sufficient cash flow 

A sufficient cash flow will allow you to cover the costs of running your labour hire company.

Frequently Asked Questions(FAQs)

Who pays labour hire employees?

Labour hire workers receive payment from the labour hire company they’re employed by instead of the host employer they’re working for. Employee entitlements labour hire workers receive must also be managed by the labour hire company they’re employed by.

However, host employers direct the tasks that the employees must complete.

How much does a labour hire license cost?

The cost of a labour hire license differs from state to state and can depend on the type of business you plan to operate. 

For example, if your labour hire company is located in Victoria, you’re required to pay an application fee of $1651.32 if your business is a tier 1 business with a maximum turnover of $2,000,000.

Contrastingly in Queensland, the tier system is based on the wages paid in the previous financial year prior to the application being made for the license. The application fee for a tier 1 business in Queensland is $1,083.43. 

Other fees related to a labour hire license include annual fees and renewal application fees

What are the benefits of having a labour hire company?

Labour hire companies provide benefits to labour hire employers, labour hire employees, and host employers, benefits include the following:

  • Employees are matched directly to roles that suit their previous roles, skills, and responsibilities
  • Host employers save time as they don’t have to go through their own recruitment process
  • Recruitment costs are reduced for host employers
  • Host employers will receive assistance from skilled employees who are suitable for the task 

How do labour hire companies make money?

Labour hire companies make money by charging host companies a fee for the work that their employees complete.

What entitlements and rights do labour hire workers have?

According to the FairWork Ombudsman labour hire employers must always provide their workers with minimum employment entitlements.   

Pursuant to the Fair Work Act 2009(Cth), a labour hire employee’s relevant award or enterprise agreement and the National Employment Standards (NES) will apply to them irrespective of the host business’s employment arrangements.

NES minimum entitlements provided to labour hire employees override other provisions if they’re less favourable to the employee. These include the following:

The award that will apply to you and your employee will depend on the industry of your business and the type of work performed by your business.

Who is responsible for the safety of labour-hire workers?

According to SafeWork Australia host employers and labour hire companies share the responsibility for the safety of labour hire workers. Although host employers have the primary duty of care in regards to labour hire workers. 

Nonetheless, you can’t rely on the host employer to take full responsibility of the health and safety of your labour hire employees or for visitors or the public whose danger may be impacted by the work site.

Labour hire firms and host employers are required to undertake a specific risk assessment of potential hazards and to ensure appropriate safety measures are put into place.

However, individuals must also show responsibility regarding their own safety and health and are obligated to look after the health and safety of others at the work site.

Do labour hire workers have workers compensation?

Labour hire employers are required to provide their employees with workers compensation

How are labour hire workers consulted?

Labour hire workers must be consulted by their own employers and host employers. Consultation refers to discussions regarding workplace health and safety.  

The decisions host employers make directly impact employees. Therefore, workers are required to contribute to work health and safety (WHS) decisions. Under SafeWork labour hire employees are considered as ‘workers’ and therefore are entitled to consultation rights.

In order for a worker’s safety to be ensured, the labour hire company, host employer, and employee must communicate effectively. Labour hire employees must be consulted about the following:

  • The work they must complete
  • The workplace’s safety
  • Which substances, machinery, or equipment they’ll be required to use
  • Whether personal protective equipment is required and who will provide it
  • Work-related hazards and risks
  • The precautions being implemented to guarantee their safety
  • What roles the labour hire agency and host employer will have in the event of an incident

Labour hire companies are responsible for ensuring whether the host employer’s WHS consultation arrangements are suitable for their employees.

To ensure compliance with WHS laws, each duty holder in a labour hire employment relationship is required to share information to determine how work is being performed and to cooperate with one another.

Conclusion

Although a labour hire business company can be difficult to start up, if done correctly, it can be rewarding and highly successful. Using this guide, you can ensure your company is at the best starting point to succeed.

If you’re still feeling unsure about how to start a labour hire company and its legal requirements you should hire a lawyer for legal advice.

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