What Is a Labour Hire Company Under Australian Law?

If you’re thinking about starting a labour hire business in Australia, you’re entering a sector with strong demand across construction, healthcare, logistics, mining and professional services.

But labour supply arrangements are legally complex. You’ll be managing workers who perform their duties at someone else’s workplace, under that host’s day-to-day direction - and that creates unique obligations and risks you need to get right from day one.

In this guide, we’ll explain exactly what a labour hire company is under Australian law, how it differs from recruitment and contracting, where licences are required, and the key legal obligations and documents you’ll need to operate with confidence.

What Is A Labour Hire Company?

A labour hire company (sometimes called an on‑hire or staffing agency) supplies workers to another business (the host) on a temporary or ongoing basis. The labour hire provider engages the workers - as employees or contractors - and then “on‑hires” them to the host to perform work at the host’s site or under the host’s direction.

This creates a triangular relationship:

• The labour hire provider is responsible for engaging, paying and managing the workers’ employment or contracting relationship.
• The host business supervises the day‑to‑day work and controls how, when and where work is performed.
• The worker performs work for the host, but their primary legal relationship (for pay and conditions) is with the provider.

Common examples include supplying tradespeople to a construction project, nurses to a hospital, or warehouse staff to a distribution centre during peak periods.

How Is Labour Hire Different From Recruitment Or Contracting?

Labour Hire vs Recruitment

Recruitment agencies typically introduce candidates to a client for a one‑off placement fee. Once hired, the worker is employed directly by the client and the recruiter’s role ends.

In labour hire, the provider remains the worker’s employer (or principal if the worker is a contractor) and continues to handle payroll, superannuation and entitlements while charging the host an ongoing fee.

Labour Hire vs Outsourced Contracting

In a pure services contract, you supply a defined deliverable and control how the work is done. In labour hire, you supply people who are directed by the host at their workplace or within their systems. Regulators and courts look at the substance of the arrangement - who controls the work, who bears the risk, and who supplies tools and supervision.

Because hosts direct on‑hired workers, you need clear boundaries to avoid confusion about control and responsibility. Issues can also arise where the host wants to keep someone on while you engage them elsewhere, raising dual employment and secondary employment risks that should be addressed in your contracts and policies.

Do Labour Hire Businesses Need A Licence In Australia?

Licensing is state and territory based. Several jurisdictions operate mandatory labour hire licensing schemes, while others regulate labour hire through general employment, safety and sector‑specific laws.

• Victoria requires providers and hosts to comply with its scheme - you can read about the criteria and obligations in the labour hire licence in Victoria guide.
• Queensland and the ACT also operate licensing schemes with fit‑and‑proper tests, financial viability requirements and reporting duties (penalties apply for operating unlicensed or using an unlicensed provider).
• New South Wales does not currently have a general labour hire licensing scheme. There are, however, important employment, work health and safety and sector‑specific obligations that still apply to labour providers and hosts. See the NSW labour hire overview for context.

Because the rules vary, it’s important to confirm the regime that applies where you operate and where your workers are placed. If you supply nationally, you may need to comply with multiple schemes.

Key Legal Obligations For Labour Hire Providers

Even where a licence isn’t required, labour hire providers sit at the centre of a web of legal duties. Here are the big ones to plan for.

Fair Work and Pay Obligations

• Minimum entitlements: On‑hired employees are covered by the National Employment Standards and any applicable modern award or enterprise agreement. Make sure your classifications, loadings, penalty rates and overtime are correct - dedicated award compliance processes are essential.
• Labour hire pay parity orders: Recent Fair Work changes allow the Fair Work Commission to make orders requiring that on‑hired employees receive at least the pay and conditions they would get if employed by the host under an enterprise agreement (often referred to as “same job, same pay”). Build this possibility into your pricing and contracts.
• Right time, right contract: Use the correct contract for the engagement (permanent, fixed‑term or casual) and set out loadings and conversion pathways clearly.

Work Health and Safety (WHS)

• Shared duties: Both the provider and the host are Persons Conducting a Business or Undertaking (PCBUs) under WHS laws. You must consult, cooperate and coordinate with the host to manage risks for on‑hired workers (e.g. site inductions, PPE, incident reporting).
• Risk assessments: Agree on hazard controls in writing and verify the host’s safety systems before placements begin, especially for high‑risk industries.

Payroll, Superannuation and Tax

• Payroll systems: Pay correctly and on time, keep accurate records, withhold PAYG, and remit superannuation at least quarterly.
• GST: Most labour hire businesses will be registered for GST - ensure invoices and credits are handled correctly across multiple hosts.

Work Rights and Screening

• Work rights: Verify Australian work rights and visa conditions before each placement and monitor changes if assignments run long.
• Screening: Industry checks (e.g. Working With Children, police checks, vaccination or qualifications) may be mandatory depending on the host’s sector.

Privacy and Confidentiality

• Personal information: You’ll handle significant personal data about candidates and employees. Implement robust collection notices, security measures and retention practices consistent with the Privacy Act.
• Host confidentiality: Include obligations around confidential information learned at host sites and return of property on assignment completion.

Anti‑Discrimination and Harassment

• Equal opportunity: Prevent discrimination in recruitment and placement decisions, and have clear procedures for handling bullying, harassment and discrimination complaints that may arise at host workplaces.

Insurance

• Core cover: Budget for workers compensation in each state where you employ, public liability, and professional indemnity (often required by host contracts).

What Contracts and Policies Should You Have?

Strong, tailored documents are your main risk control in labour hire. At a minimum, consider the following.

• Labour Hire Agreement: Sets the commercial terms with each host (rates, margins, timesheets, payment, WHS responsibilities, supervision, scope of work, insurances, indemnities and liability caps).
• Employment Contract: For on‑hired employees, this outlines duties, classification, hours, pay, loadings, rostering, confidentiality, IP, restraints and termination.
• Contractors Agreement: Where you on‑hire independent contractors, this sets deliverables, rates, tax responsibilities, tools and equipment, insurances and control.
• Assignment Confirmations: Short assignment schedules issued to workers and hosts for each placement, confirming location, role, hours, rate, safety conditions and required checks.
• Workplace Policies: Cover WHS, bullying and harassment, drugs and alcohol, grievances, social media, and incident reporting - aligned with how issues will be escalated with hosts.
• Timesheet and Approvals Terms: Clear acceptance and dispute windows for host‑approved timesheets, plus authorisation requirements to prevent fraud.
• Credit and Collections Terms: For hosts with account facilities, set credit limits, late fees and debt recovery processes.

You’ll also want clear internal procedures for screening, inductions, host site audits, incident responses and redeployment. The more consistent your paper trail, the easier it is to resolve disputes and pass audits.

Step‑By‑Step: Setting Up a Labour Hire Company

1) Map Your Business Model and Niches

Decide which industries you’ll service, the roles you’ll supply, and your geographic footprint. Consider margins, award coverage, seasonality, licensing, insurance and candidate supply. Document this in a concise business plan so you can price accurately and scope the compliance you’ll need.

2) Choose a Structure and Register

Most providers operate through a company for limited liability and credibility with larger hosts. Register an ABN, business name and (if relevant) a company with ASIC. As your team grows, think about governance and founder arrangements such as a Shareholders Agreement and internal delegations.

3) Set Up Payroll, Super and Finance

Select payroll software that handles awards, penalties and allowances reliably. Put in place superannuation default fund arrangements and set processes for record‑keeping, PAYG, GST and reporting. Build cost models that account for wage escalations, public holidays and minimum engagement periods.

4) Secure Insurance

Line up workers compensation in each state of operation, public liability, and professional indemnity where suitable. Hosts often require evidence of cover before any placement.

5) Confirm Licensing (Where Required)

Apply for licences in jurisdictions that mandate them. For Victoria, review the typical criteria and obligations discussed in the Victorian labour hire licence overview. If you operate in NSW, stay across developments and ensure you meet the duties summarised in the NSW labour hire article.

6) Put Your Contracts and Policies in Place

Roll out your master Labour Hire Agreement, assignment schedules, candidate terms, and your suite of Employment Contracts or Contractors Agreements as needed. Align them with your pricing and invoicing processes, your WHS framework and any pay‑parity order risks.

7) Build Compliance Into Your Operations

Train internal staff on awards and NES entitlements, set verification checklists (right to work, qualifications, host safety), and create a clean incident‑to‑resolution workflow with hosts. Keep an eye on roster patterns to avoid breaches and fatigue risks.

8) Start With Reliable Hosts and Grow Safely

Pilot with a small number of reputable hosts so you can refine onboarding, timesheets and billing. Tighten your credit terms early and implement dispute resolution steps in your agreements to protect cash flow.

Key Takeaways

• A labour hire company supplies workers to host businesses, creating a triangular relationship where you engage and pay the worker while the host directs day‑to‑day work.
• It’s different from recruitment (one‑off placements) and from outsourced services (you supply people, not a finished deliverable), so contracts and WHS coordination must be crystal clear.
• Licensing is jurisdiction‑specific: Victoria, Queensland and the ACT have licensing schemes, while NSW currently relies on general laws - always check what applies to your placements.
• Core obligations include awards and NES compliance (and potential pay‑parity orders), WHS duties shared with hosts, payroll and super, work rights, privacy and anti‑discrimination.
• Put in place a robust Labour Hire Agreement, appropriate Employment Contracts or Contractors Agreements, and practical workplace policies to manage risk and set expectations.
• Design your operations around compliance from the start - award interpretation, WHS coordination and clean paperwork will save you from costly disputes later.

If you’d like a consultation on setting up a labour hire company in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.