Is Your Labour Hire Provider Setting You Up for Failure (and fines)?

labour hire licensing

The employment landscape is dynamic, and there is an increasing demand for qualified workers across different industries to work for short term periods. Despite the growing number of opportunities for skilled people, employees often face exploitation at the hands of employers or service providers.
Labour hire and temporary staff are an intrinsic part of many businesses. The ability to scale up and down as demand requires is crucial for businesses with seasonal demands, or business peaks.

What is Victorian Labour Hire Licensing?

The Victorian Inquiry into the Labour Hire Industry and Insecure Work revealed the ugly face of the labour hire industry. It highlighted the widespread exploitation and abuse that labour-hire workers faced across Victoria.
The main industries that exploit casual & temp workers the most include cleaning, hospitality, security, industrial (warehousing etc), and the horticulture industry. In response to the findings, Labour Hire Licensing Act was established. Under the Act,

  • Labour hire providers across all industries – have to get a license to operate in Victoria
  • The host companies can only work with licensed labour hire providers
  • Labour-hire providers have to submit an annual report on their labour hire activities

Why is the Labour Hire Licensing Act Important?

Under the Labour Hire Licensing Act, labour hire providers or labour hosts involved in unfair treatment of workers have to face criminal sanctions. So, it is important for labour-hire providers to obtain a license. Also, the hosts have to make sure to work only with licensed labour hire providers. Failure to do so can result in hefty fines, and potential brand denigration when the media publicly chastise you for engaging in the unfair treatment of workers.
For Labour Hire Providers
If you are a labour hire provider, you have to pass a “fit and proper person test.” Also, you have to show compliance with the labour hire laws and workplace laws. Moreover, the providers are required to show compliance with the minimum accommodation standards for the hire workers and report their activities annually.
Labour providers who have not applied for the license or fail to pass the test will not be allowed to provide labour hire services in Victoria after 30th October 2019. The maximum penalty for an unlicensed labor hire provider is more than $120,000, and for unlicensed corporation up to $500,000.
This might seem straight forward. But it’s not. You might not consider yourself a ‘labour hire provider’ but if you ever ‘share labour’ or bill out your employees to another business but remain the employer of record, you could be potentially operating a labour hire company unaware. Without a license this could also have serious ramifications for your company.
Businesses that this is currently affecting include hospitality groups who share labour and oncost it to the sister company they share it to. Trades businesses who subcontract their workers to other companies and projects. Even if that company is part of a group of companies.
I use a Labour Hire Company – How does this affect me?
It is equally important for the you as the host employer to comply with the Labour Hiring Licensing Act. For this, you have to make sure that the company you are engaging with is licensed. Also, check whether the labour hire provider is compliant with the State and Commonwealth laws.
If you work with an unlicensed labour-hire provider, you will be liable to a fine with a maximum penalty of up to $500,000. Entering into deliberate arrangements with suppliers to avoid the obligations under the Labour Hire Licensing Act 2018 is also a criminal offense.
Under the Victorian Occupational Health and Safety Laws, the host is responsible for providing and maintaining a safe working environment for their workforce, including temporary & casual workers.

The Consequences

Fines and penalties are just one aspect. Your negligence can cost you much more. Rather, it can prove destructive for your business. The Labour Hire Licensing Compliance unit has suspended as many as 123 Queensland licenses as of 21 June 2019. All these labour hire providers failed to provide a six-monthly report. This is a surefire sign of non-compliance.
When a labour hire provider does not report on the due date, the compliance unit makes sure that these labour hire providers are compliant. The suspension remains in place for 90 days, during which the compliant unit decides whether to cancel the license or only impose a fine.
Imagine the business risk if your labour hire providers license gets suspended. You are left with the choice of:

  1. Finding a compliant labour hire provider in a very short space of time – quality and efficiency is likely sacrificed to do so
  2. You continue to trade with your suspended supplier – an illegal practice
  3. You try to find the workers yourself, putting undue pressure on your talent & HR team, or operations team at a time of peak requirement

Any of the above options mean precious resources (money & time) go to waste, but your company’s image and reputation are also tarnished if your clients or the public find out.
In 2019 only, the first conviction under the Labour Hire Licensing Act has taken place. A & J Group services – a Queensland labour hire provider – had failed to provide compliance records. Hence, the group was prohibited from providing services. But the group continued to work without a valid license. On receiving a complaint about the group, the Labour Hire Licensing Compliance Unit looked into the matter. A & J service was found guilty, and the court imposed a fine of $60,000.

How to Mitigate the Risk

So, if you don’t want to get caught in such an embarrassing situation, make sure to abide by the Labour Hiring Licensing Act. Take these steps:

  • Check on the Labour Hire Authority’s official website if the labour hire provider you are working with holds a license or not.
  • Ask the labour hire provider to show the compliance certificate issued by the Labour Hiring Compliance Unit. Ensure they update this with you annually.
  • Ask the labour provider to show you a detailed breakdown of the invoice. Looking at the invoice for what you have paid and what the worker has received helps to ensure that the worker is not exploited or underpaid.
  • Make sure that you provide a safe and healthy working environment for the workers you hired.

Ask for Help

You may also contact a consultant to review the labour hire practices of your business, and your labour hire provider. A consultant can ensure your business is compliant and ensure you have the best provider for your needs. Given the changing landscape of labour hire, it is likely there could be better solutions, that drive efficiency and reduce your costs – whilst remaining compliant and protecting your business against undue risk. A small investment could prevent fines, reputational damage and save you money long term.

Final Word

The Victorian Labour Hire Licensing Scheme is a great initiative to provide a level field for reputable labour providers. While it helps the labour hire providers against unscrupulous operators, it protects workers from volatile environments and drives up the quality of contingent labour statewide.

Get In Touch

If you want more information we can provide independent advice regarding your obligations or potential risks and how to mitigate them. Email for further information on how we can help.

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