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Starting a labour hire business in Victoria simplifies the usually long and expensive recruitment process for businesses seeking new staff. When doing so, however, it is important to take note of important legal considerations, such as operational licence requirements under the Labour Hire Licensing Act 2018. Additionally, you should ensure that you have well-drafted labour hire agreements and employment agreements in place. These agreements are useful to outline everything clearly to other parties and minimise any future risk. This article outlines the key legal factors to consider when starting a labour hire business in Victoria. 

Recruitment or Labour Hire Business?

Recruitment businesses and labour hire businesses are similar in nature, as they both connect willing workers with businesses seeking labour. However, there are fundamental operational differences in recruitment and labour hire businesses. On the one hand, businesses looking to fill a role will usually provide recruitment agencies with a job description. A recruitment agency will then provide their client business with candidates who meet the criteria. The client business meets and selects a suitable candidate to engage as a new employee. At this point, the relationship between the recruitment agency and the candidate ends as the selected candidate becomes an employee of the client business. 

Labour hire businesses, on the other hand, have an ongoing relationship with their candidates or workers. Workers will usually wear the host business’ uniforms and use the host business’ tools and resources. However, the workers remain directly employed by the labour hire business. The host business has obligations in relation to workplace health and safety and general workplace protections. However, the labour hire business ultimately bears the responsibility for ensuring both they and the host business comply with employment laws.

Why Labour Hire?

A labour hire business offers numerous benefits to host businesses.

For example, a labour hire business can provide:

  • reduced costs in comparison to recruitment companies;
  • reduced downtime as labour hire businesses vet workers;
  • expertise, as labour hire businesses can provide workers with a specialised skill set, allowing host businesses to avoid the cost and time associated with training; and
  • flexibility, as labour hire businesses can provide workers to suit current workloads and seasonal needs.

What Is a Labour Hire Agreement?

A labour hire agreement is a written agreement that outlines the relationship between you and the host business to whom you supply workers. Similar to having a written employment agreement, a written labour hire agreement clearly sets out the rights, obligations and expectations of both you and the host business. In particular, the agreement should focus on:

  • the performance of obligations and regular reviews;
  • the process of requesting workers;
  • legal obligations (e.g. in relation to employment laws); 
  • insurance requirements; 
  • resolving disputes; and
  • invoicing. 

Drafting a thorough labour hire agreement can help with minimising future disputes and your risk in relation to your legal obligations to your workers. 

For example, the agreement should ensure the host business warrants to provide your workers with general employment standards under the National Employment Standards (NES). To ensure your workers are not working over the maximum number of hours per week as per the NES, you should require the host business to keep accurate and up to date timesheets for each of your workers.  

What Licence Do I Need?

To operate legally in Victoria, all labour hire providers must have, or have applied for, a labour hire licence. To obtain a licence, you will need to pass a ‘fit and proper test’ and show that you comply or plan to comply with workplace laws and labour hire laws. 

Under the Labour Hire Licensing Act 2018 and regulations, you also need to provide annual reports on your activity to the Labour Hire Authority in Victoria. 

You may also face substantial fines for operating without a licence, the maximum penalties being upwards of $120,000 for an individual as a sole trader and $500,000 for a corporation.

How Do I Get a Labour Hire Licence?

You can apply for a Labour Hire licence through the Labour Hire Licensing Online portal. There are two types of applications available through the portal: 

  1. an individual application for businesses structured as sole traders; and 
  2. an organisation application for companies. 

To submit your application, you will require information including but not limited to:

  • personal details such as full name, address and date of birth (individual applicants must provide more information for police checks and companies must submit personal details of each officer);
  • whether you are registered with the Australian Tax Office (ATO) and WorkSafe Victoria;
  • the number of workers you expect to supply to hosts in the next 12 months;
  • industrial instruments that will determine the terms and conditions of employment or engagement of your workers;
  •  whether your workers will hold temporary work visas and, if so, details including the number of workers who hold such visas and the types of visas they hold;
  • the industry in which you intend to provide your labour hire services;
  • whether you intend on providing transport or accommodation for your workers; and
  • whether you or anyone connected to your application has or may have breached laws in relation to the labour hire industry, workplace laws or minimum accommodation standards.

The Labour Hire Authority will also conduct a ‘fit and proper person’ assessment for each relevant individual included in your application. To determine whether or not you are a fit and proper person, the Authority will consider a number of factors.

For example, these factors include whether you have:

  • been found guilty of certain offences;
  • contravened workplace laws; or
  • been insolvent or under external administration within specific time frames.

Do I Need to Comply With Any Other Laws?

Additionally, you will need to declare that you have a business compliance plan in place that details how you will comply with relevant legal obligations and laws.

For example, these include:

  • taxation laws;
  • superannuation laws;
  • occupational health and safety laws;
  • workers compensation laws;
  • labour hire industry laws;
  • workplace laws;
  • migration laws; and
  • applicable minimum accommodation standards.

Do I Need Employment Agreements?

An employment agreement is a legal agreement between your labour hire business and the workers that you provide to host businesses. It is important to clearly set out the relationship and rights between you and your worker and reduce the risk of a future dispute. Your employment agreements must cover key factors of the arrangement.

For example, this includes payment terms, hours, leave and termination.

Additionally, you will need to ensure that your agreement provides your workers with entitlements under the NES, including:

  • maximum weekly hours;
  • requests for flexible working arrangements;
  • leave (including, for example, annual, parental, long service, personal carer’s and compassionate leave);
  • public holidays;
  • notice of termination and redundancy pay; and
  • fair work information statement.

Key Takeaways

When operating a labour hire business in Victoria, it is important to adhere to the operational and licensing regulations. Further, you should also have well drafted employment agreements and a labour hire agreement in place to protect your business and minimise any risks. If you have any questions or need assistance with drafting legal documents for your labour hire business, get in touch with LegalVision’s commercial contract lawyers on 1300 544 755. 


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