How to start a labour hire company
Starting a recruitment company

How to start a labour hire company

Are you considering starting a labour hire company? It's a burgeoning sector, with the industry valued at $29bn in Australia and employing 327,100 workers as of 2023. 

The largest labour hire companies in Australia include big names such as Randstad, Adecco, and Manpower. However, there are many smaller and specialised agencies. In fact, there are around 10,000 labour companies currently operating. 

It’s been an interesting few years for the recruitment industry in general. It had only just recovered from the COVID-19 pandemic when it was thrust into the current economic climate. This led to various consequences including a scarcity of skilled talent, and a tendency to fill positions with temporary or contract workers.

As a result, more employers than ever are turning to labour hire companies to fill vacancies. So now is a better time than ever to get into the contract recruitment space. As industry expert Greg Savage says ‘The best time to start a temp desk was ten years ago. The second-best time is today.’

What is a labour hire company?

A labour hire company, often referred to as a staffing agency or employment agency, is an organisation that connects employers with temporary or contract workers. These agencies serve as intermediaries, helping companies find suitable candidates to fill short-term or project-based positions across various industries. 

Labour hire agencies maintain databases of skilled and qualified individuals who are available for immediate deployment. This allows businesses to swiftly address their staffing needs without going through the time-consuming process of recruitment and onboarding. Such agencies play a crucial role in the modern job market, providing flexibility for both employers and job seekers and ensuring a smooth flow of labour resources in response to changing demands within the workforce.

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Why use labour hire?

A business may engage a labour hire company for reasons including sickness and maternity cover, as well as seasonal or unexpected demand. A business may prefer to fill a role with a contractor to avoid the time and cost of the traditional recruitment process.

Labour hire businesses operate within the Temporary Staff Services Industry. They establish contracts and agreements with individuals in the job market and staff them to host companies on an ‘on-hire’ or lease basis. This approach differs from traditional or permanent recruitment, which typically involves long-term contracts. 

Workers are matched with companies that require their specific skill sets, offering both full-time and part-time employment options and they play a crucial role in filling recruitment gaps. 

According to the Labour Hire Authority of Victoria, an arrangement can be defined as a labour hire service if it meets the following criteria:

  • It is performed at the host’s premises
  • It is performed at the host’s direction
  • It is supervised by the host
  • It is not a specialised service
  • It is a key function of host business
  • It is similar in nature to tasks performed by internal employees

Benefits of a labour hire company

There are advantages to labour hire for all parties involved in the arrangement: 

For employees

  • They are matched to roles that suit their experience and skills
  • The labour hire company presents them with regular work opportunities 
  • It’s an opportunity to further their career and skills, through exposure to a variety of companies and tasks
  • The presence of two companies overseeing occupational health and safety (OHS) ensures a safe working environment

For host employers

  • They gain access to experienced and skilled staff which may be difficult with permanent recruitment
  • They save time as they don't have to go through the recruitment process
  • Labour hire reduces recruitment costs compared to hiring permanent employees.
  • Payroll is managed by the labour hire company, reducing admin

Which industries use labour hire?

Whilst all industries and roles could be filled by a labour hire company, there are certain that make use of temporary and contract workers on a more frequent basis. In particular, the trade industries are particularly reliant on labour hire:

  • The construction industry is one of the largest employers in Australia and frequently makes use of contract workers in specialised fields for projects.
  • The industrial sector uses labour hire companies for machine operators and mechanical and electrical assemblers
  • Warehouses use contract forklift drivers, pickers, and packers

In addition, the following trades are often in high demand

  • Electricians
  • Carpenters
  • Plumbers
  • Machinists
  • Mechanics
  • Steelwork traders
  • Civil engineering professionals
  • Painters

Getting started

As with starting a business in any field, you should start by conducting thorough research to gain a deep understanding of the industry landscape and your potential competitors. Try to find opportunities where there may be unmet needs. Conduct a SWOT analysis to assess your strengths, weaknesses, opportunities, and threats, and use this assessment to pinpoint your potential niche.

Next, create a business plan. Decide on your objectives for both short-term and long-term success and the strategies for achieving them. Employ this to establish clear business goals and objectives, all while taking into account your core values and mission statement.

Select a name for your company and register your business for an ABN (Australian Business Number). Decide where you want the business to be located. You’ll need to decide the most suitable structure or entity for your business—whether a company, a sole trader, or a partnership. 

Find your speciality

If you’re launching your own company, there is a good chance you’ve already been working in a particular area of temporary recruitment for some time. Your career journey may have involved working for various agencies, gaining valuable insights, and building a robust professional network. This foundation will help determine your speciality and the type of businesses you will supply workers to.

Knowing the ins and outs of your chosen niche will let you come up with solutions and give you an edge in the crowded job market. Assessing market opportunities, identifying trends, and staying attuned to shifting demands are essential components of starting a labour hire company.

Once you’ve decided on your niche, consider your ideal clients and the services you can offer them. Decide what you will charge for your services. When setting your fees it is important to consider the pay rate, which is the amount paid to contractors, and the charge rate, which is charged to clients.

Fund your business

A recruitment business is a particularly cash flow intensive operation, especially within the contract and temporary employment sector. Agencies must fulfil regular payroll obligations, and retrieving these funds from clients can often take 30 days or more.

To start a recruitment agency successfully, it's essential to secure enough capital for several months. You should have the financial means to cover necessities; including office space, equipment, digital tools, salaries, insurance, and marketing.

Relying on short-term loans, credit cards, and overdrafts is not advisable to sustain your business. There are specialised forms of business financing tailored to the unique needs of the recruitment industry, such as payroll funding. With our Afinance and Apayroll, Apositive can reduce your admin by managing your contractor payroll as well as funding that payroll with immediate advances against invoices. This means your contractors will be accurately paid on time every time.

Sales and marketing strategy

Establishing your brand is crucial. It's essential to distinguish yourself in a competitive market. To begin, you'll require a website. You can either enlist the services of an agency or a web designer to create one for you, or you can use a website builder like SquareSpace or Wix for a DIY approach.

Additionally, consider the creation of original content. This allows you to educate your audience about industry trends, whilst also enhancing your website's SEO and attracting more users.

Social media plays a vital role for recruitment agencies, with a particular emphasis on platforms like LinkedIn, where recruiters and candidates spend a significant amount of time. Furthermore, think about which job boards you intend to advertise on. Additionally, you might want to explore the use of Google Ads to boost website traffic.

Understanding the legislation

The industries served by labour hire organisations are often highly skilled and dangerous. As a result, they are highly regulated, particularly in terms of health and safety. It is critical to understand what is required and comply with local, state, and federal laws. In addition, various licences and permits may be required.

Depending on the state you operate in, you may be required to apply for a labour hire licence. In Victoria and Queensland, these are required, but not in New South Wales. They are valid for 12 months and must be renewed each year. 

You’ll need employment contracts for your contractors. Salary and benefits are governed by the Fair Work Ombudsman and minimum employment entitlements apply. These are set by the National Employment Standards (NES) and minimum entitlements - awards and agreements - will apply if they’re less favourable than those being offered. Awards depend on industry, job description, and type of work performed by business. 

A labour hire agreement is also required - this is the contact between the labour hire company and the host employer. It details all aspects of the arrangement including expectations and obligations, the process of requesting labour, insurance requirements, invoicing, and dispute resolution. 

Finally, there are workplace policies. The contracted labour will generally be governed by the internal policies and human resources department of the host organisation.

Workplace health and safety (WHS)

Otherwise known as Occupational Health and Safety (OHS), it is a requirement that labour hire workers are consulted on the work they are hired to do. They must be consulted on:

  • The work they must complete 
  • The safety of the work site
  • Substances, machinery, and equipment they will use
  • Hazards and risks and safety precautions
  • Incident management

Employers and labour hire firms share responsibility for safety, but host companies have the duty of care. The labour hire company should confirm their client is compliant and arrange a site visit, which may involve a specialist assessment. Safety is of utmost priority in trade jobs, in particular in construction and machinery.

Building a candidate pool and attracting clients

Ultimately, you require clients. A recruitment agency acts as an intermediary, catering to two sets of customers; employers and job seekers.

Your approach to acquiring and retaining clients will entail identifying your target companies and developing an enticing proposal and pricing strategy. Establishing a robust network is crucial for discovering potential clients. Nurture your reputation through exceptional customer service and expand your client base through referrals.

When it comes to job seekers, the key is to locate individuals on appropriate platforms. Research suggests that 75% of professionals are passive job seekers, so simplifying the customer journey increases the likelihood of candidates choosing to work with your agency.

The presence of experienced and skilled consultants can significantly impact business development.

Disclaimer: always refer to professional advice. The information presented here is purely indicative and not intended as advice. Always consult a legal or finance professional.

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