What is the difference between labour hire compared to a contractor? It basically refers to how businesses employ outsourced workers on a part-time basis or for a specific project.
The ATO acknowledges 5 main employment types in Australia:
- permanent full-time
- apprenticeships or traineeships
- labour hire
- contractors (including sub-contractors).
Labour hire vs contractors – what is the difference between them? As an employer, which do you choose?
Contractors are hired usually on specific projects which may require expertise that isn’t available in the permanent workforce within a business.
They take on the full responsibility of their part of the job, including the delivery of their assigned section of the job.
Contractors hire and manage their own labour hire. They organise the delivery of materials and their distribution to those working on their section of the project. They are often required to supply the tools, including any large equipment, that is needed for the project.
Employers are freed from spending much time overseeing this part of the project. There is also a cost savings in not having to recruit, as the contractor will already have access to skilled workers in specialised trades, especially relevant for niche industries and projects.
A principal contractor may also sub-contract. Nevertheless, the principal contractor is still responsible for ensuring that the subcontractors:
- take out appropriate workers’ compensation for their workers
- that workers compensation premium payments are up to date and classified in the correct industry
- that they declare an appropriate amount of wages for their insurance coverage
- that there are no outstanding liabilities.
Labour hire is somewhat similar to hiring contractors, in that labour is outsourced, saving time and money in recruiting for the employer. Check out our recent article to find out more about how do labour agencies work!
A labour hire agency employs workers and hires them out to another business or company, called the ‘host’. In a nutshell, the division of roles is that the agency handles the workers’ payroll and entitlements and the host business assigns the tasks.
Labour hire allows for more flexibility for both employer and worker. The workers may be able to take on multiple jobs in the same timeframe, using their skills and learning new ones.
The host employer can assign tasks across the whole work environment, not just on specific projects. As work tasks fluctuate, workers are only hired, and paid, on the days when required.
The labour hire agency does the recruitment and interviewing of workers. They have better targeted marketing, more exposure and therefore better responses to their advertising for skilled labour.
Labour hire agencies have larger databases of a variety of available skilled workers than contractors have. And if the host doesn’t think that the worker supplied is a suitable fit, they can be sent back and another one asked for.
Another time-saving measure for host employers is that labour hire agencies generally have a sole point of contact. This is an efficiency saving for host employers and site managers needing hire more tradespeople and other skilled workers, as they don’t have to contact several individual contractors. (Remember the large database.)
Currently, employers are eligible to claim JobKeeper payments for all labour hire workers. The JobKeeper payment is paid to the labour hire agency to reimburse them for the payment (of at least $1,200 per fortnight) they have made to their eligible workers.
Both parties are responsible for safety in the workplace. Labour hire agencies must first check onsite with a host representative that it is a safe workplace, and workers must abide by the workplace’s OH&S standards. Workers’ compensation is provided by the labour hire agency.
The good news for host employers is that labour hire agencies don’t charge penalties if the labour is cancelled, even only an hour before due to things like adverse weather conditions or hold-ups caused by other trades.
Labour hire workers may also assist contractors onsite, but a usually assigned to assist as temporary labour here there are gaps due to time lags in recruitment, people on sick leave or a lack of specialised skill expertise.
At Fast Labour Hire, we specialise in providing quality labour hire to the residential and commercial construction industry in Melbourne, Sydney and Brisbane. Contact us today for your labour hire needs.