Labour Hire Licensing & Payroll Providers: A simplified or simplistic explanation?

A female temp desk consultant looking over some documents, whilst discussing an assignment with her labour hire worker.The worker is wearing hi vis jacket , and their safety clothing is scattered about the office.

Discussion of the topic, “Who needs a labour hire licence” often gets diverted by red herring issues about whether a payroll provider is the employer, or at least the employer-of-record, and whether the worker is an employee or not.

My simplified or perhaps simplistic explanation of the licensing schemes is that, regardless of whether you are an on-hire firm or a payroll provider, you’ll need a licence if:

  • you have an arrangement with an individual to supply the individual perform work for someone else;
  • the individual qualifies as one of your “workers” (as defined); AND
  • your arrangement with the individual includes an obligation to pay the worker for the work.

This is what we call having a labour hire “supply arrangement”.

There are some subtle variations between the four existing state and territory schemes. There are also additional circumstances in which you might need a licence in Victoria.

Now, some payroll providers do have such an arrangement; others don’t.

Payroll providers which do have such an arrangement with a worker would seem to need a licence.

Those which don’t would not seem to require a licence. Indeed, I’m aware that this is a view that has been confirmed by at least one scheme regulator and that some payroll providers may be in a position to provide regulator confirmation that they do not require a licence. Of course, it’s always important to make sure that you fully understand the facts and circumstances on which that confirmation is given. Don’t assume that one-size-fits-all in this space.

The fact that a payroll provider, which has such an arrangement, requires a licence will not necessarily relieve the on-hire firm that appoints the payroll provider from having a licence as well.

It won’t matter whether the individual is an employee of the person who has the arrangement or not.

The supply of the worker can be direct or indirect; and it needn’t be contractual.

And if the arrangement needn’t be contractual, then it would seem to follow that the payment obligation needn’t be contractual either. Perhaps a moral or equitable obligation, arising from representations or a loose understanding, would suffice.

So, it would seem to make no difference to the licensing requirement whether the payroll provider is the employer or not.

The focus of the inquiry is always on identifying the presence of the labour hire supply arrangement/s. The involvement of multiple parties: typically, on-hire firms, payroll providers, and incorporated worker entities (IWEs) just makes the inquiry that little bit more difficult.

I’ll say something more about contracts with IWEs in a later post. That’s a whole other story!

Andrew C. Wood

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