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The Legal Considerations of using Labour Hire Services in Australia

There are a number of legal considerations for businesses looking to use labour hire services in Australia. These legal considerations include the termination of the contract, workers’ compensation, licensing, entitlements and the day-to-day management and oversight of the worker.

In this article, we take a look at these legal considerations and provide some helpful tips to successfully use labour-hire services.

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Author: Farrah Motley, Director of Prosper Law and a labour-hire lawyer.

A host employer can end the working relationship at any time

Labour hire services are convenient and highly flexible for employers to bring staff into their business. Workers are also more flexible, as they can adjust their work schedules to accommodate personal and family commitments. The risk to the employee is that the host employer can terminate the worker relationship anytime. This can make workers insecure about guaranteed working hours or ongoing work. This may even lead to unjustified dismissal claims.

Labour-hire relationships, where the host employer has the right to exclude workers from its workplace, are becoming an increasingly common feature of the employment landscape in Australia.

Labour-hire agencies often have little or no control over the workplaces where their employees are assigned, and the rights of these agencies are limited when a client requests the removal of an employee.

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However, companies providing labour to their clients can’t escape their legal responsibilities to their workers. They must still treat workers fairly, pay entitlements and comply with the law.

A host employer is not responsible for workers’ compensation (but public liability will apply)

How the responsibility differs between a host and the employer

Labour hire differs from hiring workers as casuals in that the employer does not hire himself but uses a labour-hire agency to hire the worker. The employer has a contract with the labour agency rather than an employment contract with the worker.

Unlike temporary and casual workers, agency workers sign contracts with the labour agency, not with the employer. The worker is not considered an independent contractor because they have a contract with the labour agency.

The host employer pays the labour agency for the work performed by the employee. The host employer pays the agency an hourly rate for each hour worked by the employee. These hourly rates usually include taxes, insurance, statutory entitlement, and superannuation. The benefit to the host employer is that it receives the skilled workers it needs without going through the hiring process itself.

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Workplace health and safety obligations

However, the labour-hire agency and the host company must ensure that a risk assessment of potential hazards is conducted. Appropriate safety measures should be taken.

This is an important step for both the host employer and the labour-hire company. If there is a claim made by the worker, both businesses are likely to be found legally responsible.

To comply with health and safety regulations, we recommend that the agency and host organisation work together to:

  • implement effective health and safety management systems to address hazards and risks;
  • ensure adequate briefing and site and task-specific training;
  • ensure the adequacy of pre-assessments for agency workers;
  • ensure adequate safety representation and consultation; and
  • ensure continuous and effective communication between all parties.

Anti-discrimination and NES obligations

Similarly, under State, Territory and Commonwealth equality laws, host organisations must ensure that workers employed in their facilities are not discriminated against.

Host organisations also have obligations under the Fair Work Act with regard to workplace protections, including avoiding unlawful workplace discrimination.

Host organisations should be aware that they may be held responsible if they breach the Fair Work Act. This includes failing to provide a labour-hire worker with their NES or award entitlements.

A host employer may participate in the breach by engaging in threats or promises or knowingly participating in the breach.

Workers’ compensation and public liability insurance

We’ve explained when a host employer and a labour-hire company will be legally responsible for the payment of compensation to a worker.

In practice, both a host employer and a labour-hire company owe an obligation to workers. And while the labour-hire company will hold workers’ compensation insurance, the host employer should have a public liability insurance policy.

Because a labour-hire worker is not an employee of the host employer, a public liability policy may apply if a worker is injured. On the other hand, the labour-hire company will rely on its workers’ compensation insurance if a worker is injured.

The employer is responsible for paying statutory entitlements

In Australia, the labour-hire company is the legal employer of the worker. As the employer, the labour-hire agency is responsible for meeting the employee’s employment entitlements. The Fair Work Act provides a safety net of employee entitlements through the National Employment Standards and awards.

All employees in Australia are covered by the National Employment Standards. Individuals may also be covered by a modern award or enterprise agreement.

Workers must at all times receive at least the minimum entitlements in the NES. The minimum entitlements in the NES take priority over any instrument that is less favourable than the entitlements under the NES. This includes an award, agreement, or contract of employment.

Awards are industry or occupation-specific and apply to employers and employees performing work covered by the award. Most awards provide coverage for the kind of work usually carried out by labour-hire workers. Generally, labour-hire workers are covered by an award that applies to the work they perform.

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An example of the application of awards to labour-hire employees

For example, Rebecca is employed by a labour-hire agency. Rebecca’s employer deploys her to a supermarket where she performs general retail tasks such as serving customers and stocking shelves. While working at the supermarket, Rebecca may be entitled to the minimum wage rates and conditions of the General Retail Industry Award. If Rebecca’s employer later placed her in a hospitality setting, such as a hotel, Rebecca would be entitled to the minimum wage rates and conditions of the Hospitality Industry (General) Award.

A host employer has day-to-day management and control over the worker

Employees sign their contracts with the labour agency, not with the host employer.

Nevertheless, the employee must work within the terms, conditions, and agreements established by the employer or “host.” Labour hire workers are employed directly by an agency, which then subcontracts them to work for another employer.

The first company is responsible for the worker’s pay and other entitlements, and the second company directs the tasks of the workers. In other words, the workers work on the premises of and under the direction of the host employer, and the labour-hire agency handles all administration related to the worker’s employment, including:

  • Employment contracts;
  • Award interpretation;
  • Payment of wages, payroll taxes, WorkCover and superannuation;
  • Group certificates and separation certificates; and
  • All hiring and termination of labour-hire assignments, etc.

A labour-hire provider must be licensed

Under new laws introduced in 2018, labour-hire companies in South Australia and Queensland must be licensed. Employers who engage in labour-hire companies must ensure that the company is a licensed labour-hire service provider. The licensing requirements are designed to regulate the provision of labour-hire services and protect workers from exploitation by labour-hire service providers.

Labour hire licensing in Queensland

The labour-hire industry in Queensland is regulated by the Labour Hire Licensing Act 2017 and the Labour Hire Licensing Regulation 2018 (collectively referred to as the scheme). Key requirements of the scheme include:

  1. labour-hire providers must be mandatorily licenced to operate in Queensland;
  2. persons engaging labour-hire providers must only engage licensed providers; and
  3. labour providers must report their semiannual labour-hire activities.

A labour-hire service provider is an entity that provides labour to another person to perform work in the ordinary course of its business. Under the new legislation, only licenced labour-hire are authorised to provide labour-hire services. Under the Queensland scheme, certain persons or classes of persons are not considered “workers” for the purposes of the scheme. These certain people include:

  1. Employees with high- income thresholds;
  2. Individual executives of corporate providers;
  3. An in-house employee was provided temporarily; and
  4. Certain internal labour-hire arrangements.

Applying for a labour-hire licence

To obtain a licence to become a labour-hire service provider in Queensland, businesses must demonstrate that they are fit and proper to provide labour-hire services. They must also prove that their business is financially viable, and that they can comply with relevant legislation.

The applicant must submit information for a labour-hire licence, including:

  • The financial viability of the company and the solvency of entities associated with the business;
  • work health and safety violations and enforceable undertakings, and workers’ compensation obligations;
  • Other licences, accreditations or authorities to carry on a business;
  • Migration matters;
  • Convictions for serious criminal offences and other violations of certain laws;
  • Discrimination and sexual harassment issues; and
  • the regions of Queensland where the applicant provides or proposes to provide labour-hire services and the industries to which the applicant provides or proposes to provide labour-hire services.

The cost of a licence depends on the total amount of wages paid in the previous fiscal year. For instance, the cost ranges from $1,000 for companies that paid less than $1.5 million in wages in the last fiscal year to $5,000 for companies that paid more than $5 million in wages in the same period.

Licences are issued for up to one year and can be renewed annually if a renewal fee is paid before the licence expires. Licences may also be granted subject to conditions such as requiring the licensee to obtain certain insurance coverage.

Various penalties are imposed for non-compliance with the licensing scheme. The maximum penalty for providing or using labour-hire services without a licence in Queensland is over $370,000. Failure to comply with reporting requirements or agreements to try and avoid the scheme can also result in fines ranging from $10,000 to $25,000.

Labour hire licensing in South Australia

The labour-hire industry in South Australia is regulated by the Labour Hire Licensing Act 2017 (SA).

Similar to Queensland, only licensed providers are authorised to offer employment services in South Australia. The definitions of a provider and a worker under the South Australian Act are nearly identical to Queensland’s legislation.

However, unlike Queensland, the law in South Australia does not exclude any person or group of persons from the definition of a “worker” in the context of employee leasing. This means that workers who are not considered workers in labour-hire services in Queensland may also be regarded as workers under South Australian law.

To obtain a licence in South Australia, companies must demonstrate that they are fit and proper to be the holder of the licence and have sufficient financial resources to carry on the business properly. In addition to the application fee, companies must pay an annual fee of $1,200.

The maximum penalty in South Australia for a business providing or practising unlicensed labour-hire services is $400,000. Penalties may also be imposed if companies attempt to enter into arrangements designed to avoid obligations under South Australian law. They may also be imposed if they provide false or misleading information to authorities about their contractual agreements.

How can Prosper Law Help?

Prosper Law is an online employment law firm with experience providing legal advice to employees and employers. We have extensive experience in dealing with employment matters.

If you are an employer using labour-hire services or an employee who is a labour-hire worker who needs employment legal advice then contact our friendly team for help.

Farrah Motley | Director

PROSPER LAW– Australia’s Online Law Firm

M – 1300 003 077

E – farrah@prosperlaw.com.au

W – www.prosperlaw.com.au

A – Suite No. 99, Level 54, 111 Eagle Street, Brisbane City, Queensland, Australia

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