How to Start a Recruitment Agency in Australia: 10 Steps

Starting a recruitment agency can be an attractive business opportunity, particularly if you already have industry knowledge and professional networks. However, success depends on much more than matching candidates with employers.

You’ll need the right business model, legal documentation, compliance processes and systems to operate efficiently and minimise risk.

Below are 10 key steps to help you start a recruitment business in Australia.

What does a recruitment agency do?

A recruitment agency, also known as a staffing or employment agency, acts as an intermediary between employers and job seekers. These agencies help businesses find suitable candidates for their open positions and assist job seekers in finding employment opportunities that match their skills and experience.

Common recruitment models include:

• Permanent placement: recruiting candidates who become employees of the client.
• Executive search: identifying senior executives or specialist leadership roles, often on an exclusive basis.
• Contract recruitment: sourcing contractors for fixed-term projects.
• Temporary staffing: supplying workers for short-term assignments.
• Labour hire: supplying workers to perform work for a host business, with the agency or labour hire provider generally remaining responsible for employing and paying those workers.

The model you choose will influence everything from licensing requirements to cash flow and employment obligations.

What is the difference between recruitment and labour hire?

One of the most important decisions you’ll make is whether you’ll operate as a traditional recruitment agency or as a labour hire provider.

With permanent recruitment, the agency introduces candidates to a client. If the client hires the candidate, the candidate usually becomes the client’s employee.

With labour hire, the business typically supplies workers to perform work for a host organisation while remaining responsible for their employment and pay. Because of this arrangement, labour hire businesses generally have broader employment, payroll, and compliance responsibilities.

Here is a quick overview:

Whether a particular arrangement falls within a labour hire licensing scheme depends on the relevant legislation and how the business operates.

Now, let’s take a look at the 10 steps to start your own agency.

Step 1: Choose your recruitment niche and business model

The first step in deciding your niche is to identify areas with high demand. Specialising early can help differentiate your agency and make client acquisition more efficient.

Consider:

• The industries you’ll recruit for
• The level of seniority you’ll specialise in
• Your geographic focus
• Permanent versus temporary recruitment
• Specialist versus general recruitment
• The types of businesses you’ll target

For example, a boutique agency recruiting CFOs through retained executive search has a very different commercial model from a business supplying warehouse workers on an hourly basis. The clients, pricing, marketing strategy, staffing requirements, and compliance obligations are all likely to differ.

While the scope of your agency will likely grow over time, it’s a good idea to have a narrow focus at the start to differentiate yourself from competitors and reduce the amount of competition.

Step 2: Decide how your recruitment agency will make money

Before preparing a recruitment agency business plan, decide how you’ll generate revenue.

Common fee structures include:

• Contingency placement fees
• Retained search fees
• Fixed recruitment fees
• Temporary or labour hire margins
• Contractor management margins

Your pricing model should also address practical commercial issues, including:

• Whether fees are calculated as a percentage or a fixed amount
• When fees become payable
• Replacement guarantee periods
• Refund or rebate arrangements
• Exclusivity
• Candidate ownership or introduction periods
• Payment terms

Clearly documented commercial terms help reduce disputes and create predictable cash flow.

Step 3: Choose your business structure

Selecting the right business structure affects taxation, liability, administration and future growth.

Many recruitment agencies choose to operate through a company because it can provide greater flexibility as the business grows. This is especially true if you plan to hire recruiters, employ labour hire workers, or enter into larger commercial contracts.

When choosing a structure, consider tax implications, personal liability, future expansion, and the expectations of prospective clients.

Step 4: Register your recruitment business

Once you’ve chosen your structure, complete the required registrations.

Your setup checklist may include:

• Obtaining an Australian Business Number (ABN)
• Registering a company if operating through one
• Registering your business name if required
• Obtaining a Tax File Number (TFN)
• Registering for GST if required
• Opening a dedicated business bank account
• Completing any employer registrations if you’ll engage staff

Businesses generally need to register for GST once their GST turnover reaches $75,000, although you may choose to register earlier.

Keeping your business registrations organised from the outset can simplify tax reporting and day-to-day administration.

Step 5: Check whether you need a recruitment or labour hire licence

There is no single national recruitment agency licence in Australia that applies to every recruitment business.

However, businesses that provide labour hire services may need to comply with state or territory licensing schemes depending on where you operate and how you’ve structured your business.

Here is a quick overview:

Recruitment businesses operating in Queensland should also be aware of the Private Employment Agents Act.

Because licensing requirements vary between jurisdictions and depend on the specific business model, it’s important not to assume that all recruitment agencies are exempt from licensing.

Step 6: Put your client terms and recruitment agreements in place

Before introducing candidates to clients, establish clear contractual terms.

Recruitment agreements commonly address:

• The recruitment services being provided
• Placement fees
• Payment timing
• Candidate introduction and ownership
• Replacement guarantees
• Refunds or credits
• Client obligations
• Confidentiality
• Limitations of liability
• Termination rights
• Privacy and candidate information handling

Labour hire arrangements typically require more detailed agreements because they often involve ongoing worker supply, workplace responsibilities, payroll, and other operational matters.

Step 7: Understand your employment obligations if you supply or employ workers

If your agency employs recruiters or supplies workers under a labour hire arrangement, you’ll need to comply with Australian employment laws.

Depending on your circumstances, this may include obligations relating to:

• Fair Work Act 2009
• National Employment Standards
• Applicable modern awards
• Minimum pay rates
• Superannuation
• Payroll obligations
• Leave entitlements
• Workers compensation
• Workplace health and safety
• Employment agreements
• Employee record-keeping

For labour hire providers, responsibilities extend well beyond finding candidates. The agency may remain the legal employer and therefore be responsible for ongoing employment obligations throughout the assignment.

Step 8: Set up candidate privacy and data-handling processes

Recruitment agencies often collect significant amounts of personal information, including:

• CVs and resumes
• Contact details
• Employment histories
• Salary expectations
• References
• Identification documents
• Background check information
• In some cases, sensitive personal information

The Privacy Act 1988 regulates how organisations collect, use, store, and disclose personal information. You may also be subject to the Australian Privacy Principles.

Before collecting candidate information, establish clear privacy processes. This means you should:

• Have a clear privacy policy that outlines how personal information is handled.
• Collect only the information you genuinely need.
• Explain how that information will be used.
• Obtain consent to collect and share personal information.
• Securely store all candidate data.
• Provide candidates with access to their personal information upon request.
• Assess third-party recruitment software carefully.
• Understand whether overseas or cloud-based data storage is involved.

Be sure to assess any applicable legislation for your company and follow its requirements carefully.

Step 9: Choose the systems you need to run the agency

Technology is a critical tool for most recruitment agencies. It helps manage the plethora of candidate profiles, match them with new opportunities, and keep track of the legal and financial aspects of candidate placement.

You’ll need to implement several key software tools to streamline your recruitment processes:

• Applicant Tracking System (ATS) to manage candidate applications and resumes
• Customer Relationship Management (CRM) software to track client interactions and job orders
• Video interviewing platforms to conduct remote interviews
• Background check and reference verification tools
• Payroll and invoicing software to manage finances and payments

You’ll also need basics like a website, accounting and payroll software, invoicing, e-mail, and so forth.

When using technological tools, be careful to screen them for the ethical and data privacy considerations discussed above.

Consider implementing an IT policy and a data breach policy to protect your business, candidates, and clients.

Step 10: Build your initial client and candidate pipeline

Recruitment businesses need both employers and candidates to succeed.

To attract clients for your recruitment agency:

1. Leverage professional networking platforms like LinkedIn to connect with potential clients and showcase your expertise.
2. Attend industry events and job fairs to meet potential clients face-to-face.
3. Offer free consultations or workshops to demonstrate your value to potential clients.
4. Develop a referral program to encourage satisfied clients to recommend your services.
5. Create targeted marketing campaigns highlighting your agency’s unique selling points.

To build a strong candidate pool:

1. Partner with job boards and professional associations to tap into a broader pool of candidates.
2. Use social media platforms to engage with potential candidates and promote job openings.
3. Implement an Applicant Tracking System (ATS) to efficiently manage and organise candidate information.
4. Offer value-added services, such as resume-writing workshops or interview coaching, to attract top talent.
5. Maintain regular communication with candidates to keep them engaged and informed about new opportunities.

These are just some ways to onboard clients and candidates. Think about the specifics of your industry niche to develop the most effective strategies.

What does it cost to start a recruitment agency?

There is no single average cost of starting a recruitment agency because expenses vary depending on your business model, location and scale.

Typical startup costs may include:

• Company or business registration
• Labour hire licensing (Australia)
• Insurance
• Legal agreements
• Website and domain registration
• ATS and CRM subscriptions
• Job board advertising
• Recruiter software
• Accounting and payroll systems
• Marketing expenses
• Employee salaries
• Contractor or temporary worker payroll

One of the biggest financial differences is between permanent recruitment and labour hire, with the latter incurring much higher set-up costs.

What insurance should a recruitment agency consider?

Depending on your business model, you may wish to consider insurance such as:

• Professional indemnity insurance
• Public liability insurance
• Workers’ compensation insurance (if engaging employees or workers)
• Cyber insurance

The insurance you require will depend on your operations, contractual obligations, and whether you employ staff.

Recruitment agency startup checklist

Before launching your agency, make sure to:

Setting up a new business is an exciting prospect, but it takes a lot of work and due diligence. Start a recruitment company with ease with Lawpath’s wide portfolio of legal documents designed specifically for small businesses.

Need some help? Contact our team of legal experts today.

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