Host employers pay a fixed fee to the labour hire agency, which includes all insurances, taxes, statutory charges, and other fees. The employees are paid directly by the agency, because the agency, not the host employer, employs them. A sample billing calculation could be as follows;
Amount charged to host employer (the client);-
- Base rate of pay: $19.78
- Superannuation 9%: $1.78
- Workers compensation insurance: $0.21
- Payroll tax: $0.89
- Administration fee: $1.66
- Margin: $4.72
- Total billed to client: $29.04 +GST per hour
The role of the agency is to recruit and select the most appropriate staff for their clients’ roles, and importantly, to maintain a pool of available workers for the various assignments that might arise from day to day. The agency is not of much use to their clients if they don’t have appropriate staff when required. Labour hire is a convenient option for companies who need staff, but don’t want to (or can’t) hire directly. In Australia in 2002, there were over 230,000 labour hire workers according to the Australian Productivity Commission, and that number is continuing to trend upwards. For a look at why so many companies are using agencies, check out the following benefits.
1) Flexibility – if a new shipment of stock arrives, there are more staff available on call to deal with it. Similarly, a small company can feel comfortable tendering or quoting for a big contract, because they know they can access staff to back them up in the event they win the contract.
2) Non-commitment – many industries are seasonal, requiring a larger workforce during some times of the year, and less workers during other times. By using an agency, companies can easily increase or decrease their staff levels as required.
3) Once off assignments are OK – if a cleaning company had a contract to do a major clean on a cruise ship that docked in town only once a year, they could easily have the right level of staff for the job almost overnight, whereas it would not be practical to employ hundreds of staff for the entire year just waiting for the ship to arrive.
4) Outsourced HR – companies can spend hundreds of hours advertising, interviewing, checking backgrounds, checking references, and making selections – only to have to repeat the process a few weeks down the line if the employee doesn’t work out. By using a agency, this no longer is the problem of the company; instead it’s handled by the agency entirely.
5) Outsourced payroll and admin – interpreting awards, calculating timesheets, responding to staff enquiries, and processing payroll are tasks that consume substantial amounts of time. When an employer chooses to engage staff through an agency, these functions are all performed externally, removing the administrative burden from in-house staff.
The term labour hire is mainly an Australian term – in other countries it’s known as staffing or manpower, and the companies who provide the service are called manpower agencies or staffing agencies.
Most labour hire companies will allow the host employer to directly hire the worker, in exchange for a placement fee. For example – if Toms Bread Company hired a delivery driver (we’ll call him Fred) through an agency to replace the non-reliable drivers he’d so far had, and found that Fred was actually a great and reliable employee, he would obviously want to employ Fred permanently. In order to do so, he would pay the placement fee to the agency, and Fred would cease to work for the labour hire agency and would commence immediately as a direct employee of Toms Bread Company.
The issue of responsibility for safety and wellbeing of the worker is an area that both labour hire agencies and host employers alike must pay close attention to. In the event that a labour hire worker gets injured, both the labour hire agency and the host company are responsible. In a recent Australian court case, a host employer and a labour hire company were fined $120,000 over an incident which occurred when a labour hire worker operated a forklift despite not being appropriately trained or licensed to do so, resulting in the forklift rolling over and the worker losing his leg as it was crushed.
The Perth Magistrates court fined host employer Beds Plus $80,000 for failing to ensure the provision of a safe workplace, and the labour hire company Flexi Staff was fined $40,000 for the same offence. Although this case might suggest the liability rests mainly with the host employer, this is not necessarily the case – the courts very much take a case-by-case approach to determining liability, and consider factors including how much monitoring and inspection of the host employer is done by the labour hire company.
Any agency that takes their role seriously will do regular site audits to ensure their staff are being as safe as possible, and to ensure that their staff are appropriately trained and licensed for the tasks they are carrying out.
In addition to benefits for the host companies, the staff who work for a labour hire company are often more satisfied working for a labour hire company than they would be working directly for a single company. The reasons given include changing work environments – they don’t get stuck in the rut working with the same people all the time, freedom of casual work – they know they won’t cause anyone too much inconvenience if they need to take a week or two off work, ability to work close to home – they only accept jobs within a certain distance of their home, and most of all – opportunities to progress to better positions as they become more experienced with their employer.
Labour hire is a good solution – it doesn’t work for everyone, but anyone looking at ways to manage their workforce should consider the option of labour hire.