Legal, compliance and insurance
Starting a recruitment company

Legal, compliance and insurance

So you’re thinking of making the jump and starting your own recruitment agency. Maybe you’ve been a consultant at a larger agency before. If so, no doubt you’ve been focused on business development, placing candidates and networking and less so on legal matters, compliance and insurance. 

In this article we will take a look at those three areas. It's important to note that we are just providing a rough overview of what you’ll need to consider as a starting point. This article should not be considered as advice, the information is purely indicative and you are highly recommended to consult a legal professional on all such matters.

With that out of the way, let’s get into it.

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What kind of agency are you starting?

Firstly, the type of agency you are starting makes a big difference. There are many more requirements involved if you’re launching a temp / contract desk, compared to permanent only.

Terms of business

The first thing you are going to need regardless of the type of agency you are launching is some basic legal documents. 

You’ll need a qualified lawyer to assist with drafting your terms of business. It is important that these are not just a copy and paste from a previous company, but are suited for your unique requirements. This document may include information on fees, candidate introductions and placements and more.

When starting out, in most cases you will also need to register the business with ASIC and obtain an ABN.

Contract of employment

If you're launching a temp / contract agency, then you are likely to be employing contractors directly and on-hiring them to host employers. Therefore, you are responsible for the employment of the contractor on-site and as such the contact of employment. This contract  needs to be provided by a lawyer and would specify what they are expected to do on site and may include information on rates and remuneration.


As a fledgling recruitment agency owner, the next thing you’ll need to consider is insurance. You’re going to need Professional Indemnity (PI) and Public Liability (PL) cover. Professional Indemnity protects you when an incident happens due to a recommendation you’ve made to your clients. Public liability is for when your company causes damage to property or injury to third parties and you are therefore liable for the costs and damages. Both types of cover are national policies, so do not change state to state.

Work cover (or workers compensation insurance) varies state by state and is there to protect your employees in the case of work related injuries and illness.

These are all compulsory. Optional cover includes Directors Liability insurance, which protects owners and directors against a wrongful act committed in the management of the company. There is also Cyber Insurance, which relates to the coverage of losses incurred through data destruction, hacking, data extortion, and data theft.


So you have set up and registered the business and drafted terms of business. You have a contract of employment for your contractors, so could in theory place with with clients. The biggest hurdle now is are you legally allowed to recruit and on-hire those employees? You may be required to obtain a licence from a labour hire authority, depending on the states in which you operate.

Labour hire companies must obtain a labour hire licence in QLD, VIC and ACT. They are valid for 12 months and must be renewed each year. There is no requirement for a licence in NSW. In SA and WA, licencing is more complicated - there are niche industry requirements, as well as recruitment agent licences. It is essential that you understand the licensing requirements that apply to your business.


Occupational health and safety (OHS) is another key consideration for labour hire businesses. It is essential that the worksite to which they are sending contactors meets the highest levels of safety. Responsibility is shared between the agency and the host employee, but the best practice here is to cover yourself ensure standards are met. The worksite must be inspected prior to placing contractors. This applies to blue collar workers, but there is also a requirement for inspection of work stations for white collar workers.

Industry bodies

Another thing to think about as a startup recruitment agency is industry bodies. Whilst there is no legal requirement to do so, it is recommended to consider membership of recruitment specific organisations such as RCSA, APSCo and NPA Worldwide. They can help with education on the topics listed above, as well as provide a great opportunity to network with others in your industry. 

That disclaimer again: always refer to professional advice. The information presented here is purely indicative and not intended as advice. Always consult a legal professional.

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