A labour hire business can be an exciting and promising business venture, however it’s important to properly navigate the legal landscape if you want your business to be a success.
If you’re thinking about starting a labour hire business, it’s imperative to know the right way to start your business, the legal structures you need to understand, what legal obligations might impact your business as well as getting the correct legal agreements to protect your labour hire business.
So, if you’re keen to start your own labour hire business – then you’ve come to the right place.
What Is A Labour Hire Business?
A labour hire business provides workers to companies that are looking for extra help. Labour hire is largely utilised in the construction sector however, other industries such as IT might also engage in labour hire arrangements.
Essentially, the labour hire business (known as the provider) has a number of workers employed under them. The labour hire business is the direct employer of these workers, so the business is responsible for their pay, entitlements, superannuation, leave and anything else employees might need from their employer.
When a company contacts their business looking for workers, the labour hire business sends their employees to work for that company. This is usually for a period of time or until a particular task is complete. During this time, the workers are still employed under the labour hire provider, so even though they’re working with a different business, the labour hire provider still has a legal responsibility towards the workers as their employer.
As great as starting a labour hire business may be, there’s a number of legal considerations you need to look out for. Without the right legal protections, what may seem like a simple labour hire arrangement can get messy fast! Don’t worry though, we’ll walk you through what you need to know.
What Is The Difference Between a Recruitment Agency And A Labour Hire Business
At times, people get confused between a recruitment agency and a labour hire business. Even though both types of businesses are in the industry of hiring out workers, their methods are very different. Recruiters find internal employees for a business by sorting through potential candidates. As we mentioned, labour hires already work for their employer – they are simply sent out to a host business to conduct work for them over a limited period of time.
Despite the difference, a labour hire business and recruitment agency may still have a few things in common, such as the way they might register or protect their business. Whichever end of the stick you fall on, keep reading to learn more.
If you would like to learn more about the difference between labour hire businesses and recruitment agencies, check out our article that explores the two in more depth here.
How Do I Start A Labour Hire Business?
A labour hire business is started like most businesses are. By researching, planning, strategising and then finally, executing. Even though you might be excited to jump into the business world, it’s important to take your time with this step. Carefully taking our time to understand your business potential strengths and weaknesses can really make a difference in the long run.
What Do I Include In My Business Plan For Labour Hire?
It’s always a good idea to add all your ideas and research into a Business Plan. A business plan doesn’t need to be anything fancy – you might even be the only one to look at it. However, it’s always a good idea to have, as it tends to be the blueprint for your business. A few things you could include in your business plan include:
- Executive summary
- Financial plans
- Marketing strategy
- Industry research
- Branding and other forms of intellectual property
While you’re writing up your business plan, it’s a good idea to figure out what kind of legal structure your labour hire business will have.
Choosing A Legal Structure and Registering A Labour Hire Business
When you’re thinking about the kind of legal structure that will be right for your labour hire business, you need to think about things like risks, liabilities, upkeep, management, costs and the registration process.
When you have a clear idea about these matters, it’s easier to choose a legal structure. Commonly, Australian businesses are either registered as a sole trader or a company. If two or more business owners come together to start their venture, then they might opt to start their business as a partnership.
So, what makes these legal structures different from one another?
There’s advantages and disadvantages to all types of legal structures. Let’s explore them in more detail below.
A sole trader structure is precisely what the name states. Setting up as a sole trader is simple, quick and easy. All you need to do is get an Australian Business Number (ABN) and Register A Business Name, if you’re using something other than your own name. Setting up as a sole trader can be completed online and in a short amount of time.
However, if you choose to run your business as a sole trader, you will be liable for the entire business. This is because the business is seen as part of your legal identity – meaning it has no separation from you. Due to this, what happens with the business directly impacts you personally. This might be okay when your business is running as planned. However, if something goes wrong – then as a sole trader your legal protections will be limited.
If you decide to start a business with a partner, the same concept applies. The registration process is fairly simple (both partners just need to have their respective ABN’s) however, both partners will be personally liable for the business.
A company structure is recommended if you’re looking to start a serious labour hire business with long-term goals. Companies are a legal entity on their own. So, even though starting a company is more expensive and time consuming (you’ll likely need the help of a legal expert) it does offer more legal protection, which is essential for managing risk. Starting a company involves sorting out shareholders and directors, registering with ASIC and paying fees. A legal expert can assist in making sure your Company Gets Registered the right way.
What Legal Regulations Do I Need To Follow As a Labour Hire Provider?
When you decide to start your labour hire business, there’s a number of legal regulations you’ll need to follow to ensure your business is legally compliant. We’ve provided a general overview below of the regulations that will likely impact your venture however, it’s always best to talk to a Regulatory Compliance Expert so they can provide advice that’s specific to you.
Labour Hire Licence
Depending on the state you’re in, you might need to apply for a labour hire licence. This is the licence that will allow you to legally operate as a labour hire provider. Not all states will require a labour hire licence but if you do, make sure you’ve completed an application before you start any business operations. Even if your state doesn’t require a labour licence, there may be some other state requirements or local council permits you need to attain – we recommend doing thorough research to make sure you’ve met every requirement.
Work Health and Safety
When your employees go to work for a host business, it’s imperative that you’ve taken reasonable steps to ensure their work environment is a safe one. Safe Work Australia sets the standard for all employee conditions across Australia, so it’s a good idea to get familiar with them. It’s also recommended by Safe Work Australia that labour hire providers and host businesses work together to ensure all workers are treated according to their standards.
Other Employer Obligations
Even though your employees aren’t working under your direction, as they would in most other types of businesses, you still have the same legal obligation towards them as any other employer. This means, making sure your employees are receiving the correct entitlements, pay, awards, leave, sick days and anything else that needs to be taken care of.
If you’re confused about the best way to ensure you’ve met all your obligations towards your employees, taking an Expert In Employment Law can help.
Do I Need Any Legal Documents For My Labour Hire Business?
The best way to safeguard your labour hire business is to have strong, well drafted legal agreements in place. After all the effort you’ve put into researching, planning and setting up your business, it’s reasonable to want to make sure things run as smoothly as they can from here onwards.
The right legal documents can go a long way in protecting your business. That way, you can focus on running the business without much worry. A few legal documents you might want to look into getting include:
Our legal experts can help determine the exact legal documents your business will need, so get in touch today to further discuss your options.
Starting a labour hire business is an exciting venture, however it’s important to take care of all the legal considerations first. To summarise what we’ve discussed:
- A labour hire business provides workers to other companies in need of extra help
- The labour hire business employs workers directly, responsible for their pay, benefits, and other employment-related matters
- Workers sent to a client company are still legally employed by the labour hire provider
- Different from recruitment agencies, labour hire workers are already employed and sent to host businesses temporarily
- Both types of businesses may share common registration and protection methods
- Starting a labour hire business involves research, planning, and strategy development
- A business plan should include an executive summary, financial plans, marketing strategy, industry research and branding
- The legal structure for the business can be a sole trader, partnership, or company
- Sole traders and partnerships offer simplicity but come with personal liability
- A company structure offers legal protection but involves more complexity and costs
- Legal regulations, including a labour hire licence and work health and safety standards, must be followed
- The labour hire business is responsible for ensuring employees receive proper entitlements and benefits
- Legal experts can help determine the specific documents needed
- Prioritise legal considerations when starting a labour hire business to ensure compliance and success
If you would like a consultation on starting a labour hire business, you can reach us at 1800 730 617 or firstname.lastname@example.org for a free, no-obligations chat.
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