What is Labour Hire?
Labour hire happens when a business searches for individual employees as needed on specific projects on a fee or contract basis. This can include apprentices and trainees as well as experienced workers in a variety of employment categories.
Labour hire differs from hiring workers as casual labour in that the employer does not do the hiring in-house but outsources the hiring to a labour agency. The employer has a contract with the labour agency, not with each individual employee.
Unlike temporary staff and casual workers, labour hire workers sign their contract with the labour agency, not with the employer; they are not considered independent contractors as they have a contract with the labour agency.
The fee paid by the employer to the labour agency is for the work done by the employee on site. It is not a fee for hiring the labour.
Labour agencies are legally responsible for their works complying with Australian industrial law, and the workers must comply with the employment conditions of their employer.
In return, labour hire workers must be offered the wages and conditions relative to their specific employment and the applicable industrial award.
However, the worker is only covered by the enterprise bargaining agreements current in the workplace if there is a clause written into their contracts.
Enterprise bargaining agreements take place between the labour agency and the people it hires for others.
This can result in different levels of pay between workers on the same site, depending if they are employees of the business or of the labour agency.
A labour agency is known in other countries by different names. In the UK, it is called an ‘employment agency’ and in the US as a ‘professional employer organization’.
Labour hire itself is referred to in the US as ‘labor contracting’ or ‘permatemping’ and in South Africa as ‘labour brokering’.
People employed under labour hire arrangements in the UK and Europe are known as agency workers.
So, what is labour hire, and how does it work?
In Australia, a labour agency, also called a recruitment agency, will be the employer.
Employees sign their contracts with the labour agency, not with the employer they are outsourced to, and are paid by the labour agency.
Nevertheless, the employee is required to work within the conditions and agreements of employment set out by the employer, or ‘host’.
This is, in effect, similar to being a contractor, with the drawback of not being protected against unfair dismissal.
Labour hire usually takes place on a project-by-project basis, often in jobs requiring manual skills.
The building and construction, and mining industries are some of the biggest hirers in Australia of labour hire.
Employers in the industrial sector will often hire machine operators, process workers, mechanical assemblers and electrical assemblers.
Warehousing will require storespeople, forklift drivers, and pickers and packers.
Employers in businesses that suffer from staff underemployment (for instance, due to illness), or are driven by seasonal business demands, or are at the behest of unstable supply chains can contact a labour agency for extra staff.
Businesses that are in the process of new construction or fit-outs for themselves may also need labour hire so that the business can keep running without disruption.
Yearly audits and busy periods may also be an occasion to hire outside employees.
What is labour hire like for the employee?
There are many advantages to get work through a labour agency for the employee in a specialised field or who are highly skilled.
A well established labour agency will have a variety of reputable companies on their books. This gives workers, apprentices and trainees much needed valuable experience to add to their skill set and resumés.
It ensures that workers continue to get employment in their specific line of work, and can offer flexibility in such things as hours of work, diversity of employment and the ability to schedule labour hire work around other jobs.
What are the labour hire pros and cons for the employer?
Imagine you are the manager of a large retail warehouse. You are coming up to the Christmas season and you need more staff to work in the warehouse sorting and packing.
The warehouse also need a major electrical upgrade and your boss has told you that, in the quieter post-New Year weeks, the warehouse will be undergoing an extensive new fit-out.
Your employees are too busy with their regular work to be able to lend a b=hand, even if they had the required skill set.
Do you have time to begin a recruitment process? Do you have the knowledge to know what skills and experience to look for and even recognize if they are qualified?
This is where it is so much easier to contact a labour agency. The agency will already have vetted high quality workers. They can match their skill set with the job you have in mind.
And instead of spending valuable time and effort needed to process payroll, tax, and other worker entitlements such as superannuation, all you need do is pay one fee.
Both the labour hire employee and the employer sign a contract with the labour agency. However, the employer is not privy to the details of the contract between the labour agency and the employer.
It can therefore become somewhat confusing when trying to work out who is responsible for what.
The employee has signed a contract with the labour agency but now works for the employer.
What happens if that employee is injured at work? Who deals with charges of discrimination in the workplace? Are the employees protected against unfair dismissal?
Nevertheless, many large Australian businesses and companies are turning to the labour hire market as it offers a cost-effective, time-saving way of gaining skilled labour at crucial periods in the annual work cycle.