A labour hire agreement is the commercial contract between a host business and a labour hire provider. It is not an employment contract and it is not a contractor agreement. It sets out who supplies the worker, who directs the work, how the worker is paid, who carries which insurance, what happens if the worker is injured, and how the arrangement ends. The seven clauses below are non-negotiable for any Australian employer engaging a labour hire provider in 2026. Get them right and the agreement stands up. Get them wrong and you are exposed to tax reclassification, WHS liability, and Fair Work disputes.
At the end of this blog you can request a free template that puts these clauses in a single document. The template is a starting point, not legal advice. Any arrangement worth more than a few thousand dollars in annual spend should also be reviewed by a lawyer familiar with labour hire law in your state.
What a labour hire agreement is (and isn’t)
A labour hire arrangement involves three parties:
- The labour hire provider (agency). Employs the worker and pays them wages, super, and PAYG.
- The host business. Directs the worker’s day-to-day tasks and pays the provider a charge-out rate.
- The worker. On the agency’s payroll, under the agency’s employment contract, performing tasks at the host site.
The labour hire agreement is the contract between the first two parties. It is:
- A B2B commercial agreement
- Governed by contract law and, in licensed states, by the relevant labour hire licensing scheme
- The mechanism that defines the commercial and risk-sharing terms
It is not:
- The worker’s employment contract. That sits between the agency and the worker.
- A contractor agreement. The worker is not a contractor. They are the agency’s employee.
- A cover document for sham contracting. Misusing a labour hire arrangement to avoid employer obligations is a contravention of the Fair Work Act.
For a broader background on how labour hire works, see /blog/how-labour-hire-works/.
How the labour hire agreement differs from an employment contract?
| Feature | Labour hire agreement | Employment contract |
|---|---|---|
| Parties | Host business and agency | Agency and worker |
| Subject matter | Supply of workers and commercial terms | Individual’s duties, wages, leave, notice |
| Employer obligations | N/A between the signing parties | Full employer obligations (super, leave, notice) |
| Terminates | Per notice and termination clauses | Per employment law (notice, redundancy, etc.) |
| Fair Work exposure | WorkCover WA (approved insurers) | Full Fair Work Act coverage |
| Tax treatment | Service invoice with GST | PAYG, super, FBT |
Confusing the two is a common and expensive mistake. A labour hire agreement cannot attempt to bind a worker to conditions that override their employment contract. A worker cannot sign themselves out of Fair Work entitlements through a side letter.
The 7 Must-Have Clauses
Clause 1: Scope and nature of services
What it must cover
- The specific roles being supplied (for example: warehouse pickers, forklift operators, food processing line staff)
- Each role’s required licences, tickets, and certifications (forklift licence, RCG, white card, food safety, working at heights)
- The industry scope and whether it matches the labour hire provider’s licence (in Victoria, Queensland, SA, ACT)
- The site or sites where workers will be placed
- Indicative volume and shift patterns
Why it matters
If the provider’s Victorian labour hire licence does not cover the industry your site operates in, they are not licensed to supply you. The host is exposed. A well-drafted scope clause protects both parties.
Example drafting
“The Provider shall supply personnel in the classifications set out in Schedule 1 (the Roles) for work at the site(s) listed in Schedule 2 (the Site). Each Role is supplied subject to the Provider’s licence under the Labour Hire Licensing Act 2018 (Vic), licence number VICLHL10427.”
Clause 2: Rates and charge-out breakdown
What it must cover
- The charge-out rate per role, per shift type
- A line-item breakdown: base rate, casual loading, superannuation, WorkCover, payroll tax, PPE, administration, margin
- Weekend, public holiday, and overtime rates
- Invoicing frequency (weekly or fortnightly)
- Payment terms (typically 14 or 21 days from invoice)
- Rate review terms (annual, tied to award movements)
Why it matters
Opaque pricing is where disputes start. If an invoice arrives with a different hourly rate than expected, the agreement should settle the question in a paragraph. A line-item breakdown also makes it much easier to audit for under-payment of super or WorkCover. Super Guarantee is 12 per cent in 2025-26 (ATO).
Example table in the agreement
| Role | Base | Casual loading | Super | WorkCover | Admin | Margin | Total (ex GST) |
|---|---|---|---|---|---|---|---|
| Warehouse picker | $28.00 | $7.00 | $4.20 | $1.80 | $0.90 | $6.50 | $48.40 |
| Forklift operator | $31.50 | $7.88 | $4.73 | $2.20 | $0.90 | $7.29 | $54.50 |
Clause 3: Supervision, direction, and control
What it must cover
- Who directs the worker’s tasks day to day (the host)
- Who supervises performance and conduct at the site (the host)
- Who disciplines or terminates employment (the agency, after consultation with the host)
- Who handles timesheet approvals (the host manager, confirmed to the agency)
- Escalation path for complaints, grievances, or underperformance
Why it matters
Labour hire blurs the normal boss-worker relationship. The worker is employed by the agency but takes daily instructions from the host. Fair Work and the ATO look closely at which party was actually in control of the work. A clear supervision clause reduces the risk that the arrangement is recharacterised as direct employment.
Practical drafting point
State explicitly that the host may not unilaterally terminate the worker’s employment. The host can remove the worker from their site, but the agency decides on termination. This prevents a single site manager from triggering an unfair dismissal claim the host business never authorised.
Clause 4: Work health and safety responsibilities
What it must cover
- Both parties are PCBUs under the model WHS laws and both owe a duty of care to the worker
- The host’s obligations: safe site, hazard disclosure, induction, PPE if required, supervision
- The agency’s obligations: competent worker selection, induction to general WHS principles, fit-for-work assessment
- Incident and near-miss reporting process and timeframes
- Return-to-work coordination in the event of injury
- Right of the agency to remove a worker from an unsafe site
Why it matters
Safe Work Australia’s model WHS laws recognise that both the labour hire provider and the host are persons conducting a business or undertaking (PCBU). Both owe a primary duty of care. You cannot contract out of that duty. You can, however, define who does what in practice, which is what this clause is for.
Incident reporting is non-negotiable
Require the host to notify the agency of any incident involving an on-hire worker within 1 hour of occurrence, and within 24 hours in writing. Ambiguous reporting timelines is where WorkCover claims go wrong.
Clause 5: Worker replacement and back-fill
What it must cover
- Definition of a no-show, late start, and early-shift failure
- Agency response obligation if a worker does not start on time
- Back-fill response time in hours, in writing
- Host’s right to refuse a specific worker on reasonable grounds (e.g. performance or conduct)
- Agency’s right to remove a worker on safety or performance grounds
Why it matters
This is where the agreement turns from a commercial document into an operational tool. A back-fill clause with a defined SLA and a consequence for missing it drives better service. A best-efforts clause with no remedy drives complacency.
Example drafting
“If a Worker does not commence a confirmed shift within 15 minutes of the scheduled start, the Provider shall confirm a replacement within 30 minutes and deliver the replacement to Site within 2 hours for metropolitan shifts and 4 hours for regional shifts. Failure to meet this SLA entitles the Host to a credit equal to 50 per cent of the rostered shift value.”
Clause 6: Termination and notice
What it must cover
- Notice period for ordinary termination (typically 30 days; 60 days for large-volume arrangements)
- Immediate termination triggers: breach, loss of licence, insolvency, repeated WHS breaches
- Exit and handover process: final invoicing, return of equipment, knowledge transfer
- Worker transfer rules if the arrangement ends: temp-to-perm conversion fees, restraint on direct hiring
- Survival of key clauses (confidentiality, indemnity) beyond termination
Why it matters
A one-year arrangement that auto-renews with 90 days’ notice is a lock-in. Negotiate down. Also make sure the loss-of-licence trigger is there: if the provider loses their Victorian LHA licence, the host needs to be able to terminate the same day without penalty, because continuing to use an unlicensed provider exposes the host to a breach of the Act.
Clause 7: Indemnity and insurance
What it must cover
- Mutual indemnities (agency indemnifies for employer obligations; host indemnifies for acts and omissions on site)
- Required insurance cover for the agency:
- Public liability: minimum $20 million
- Professional indemnity: minimum $5 million
- Workers compensation: current in every state workers are placed
- Certificates of currency delivered at signing and at each renewal
- Right of either party to request certificates during the term
- Cap on liability (usually a multiple of annual charge-out value, with carve-outs for WHS breach, wilful misconduct, and indemnity obligations)
Why it matters
When something goes wrong, the insurance policies carry the risk. If the agency’s PL insurance is not current, the host is holding the exposure. This clause ensures the insurance stays real, renewed, and documented.
Clauses you want but are not legally required
These are not mandatory, but every mature arrangement will include them.
Exclusivity
Usually not worth it for the host. If offered in exchange for a lower rate, model out the cost carefully. The flexibility to run a parallel provider during peak season is often worth more than a few cents per hour.
Service-level agreements (SLAs)
Formalise the operational metrics into a separate schedule:
- Fill rate (filled shifts / requested shifts): target 95 per cent plus
- On-time start rate: target 98 per cent plus
- Back-fill response time: defined in clause 5
- Timesheet accuracy at first invoice: target 99 per cent plus
- Site visit frequency: monthly minimum
Technology and timesheet systemdefined broadly
Specify the tools used for timesheet capture and invoice reconciliation. A paper-timesheet clause in 2026 is a sign to renegotiate.
Data protection and privacy
The host shares worker data and site information with the agency. Define:
- What data is shared
- How it is stored and for how long
- Cross-border transfer restrictions (where relevant)
- Obligations under the Australian Privacy Principles
What Fair Work looks at if a dispute arises
Agreements do not make workers casual. The Fair Work Commission and the Fair Work Ombudsman look at the substance of the relationship, not just the paperwork. When a dispute arises, the following evidence typically matters more than the agreement:
- Rostering and timesheets. Do they show a regular, systematic pattern?
- Payslips. Is the correct casual loading and super being paid?
- Induction records. Did the host induct the worker to the site?
- Incident reports. Who was notified and when?
- Written communications. Emails and SMS often contradict the formal agreement.
- Written communications. Emails and SMS often contradict the formal agreement.
A labour hire agreement that says “casual” while the site runs a worker on the same Monday to Friday roster for 12 months will not survive Commission scrutiny. The agreement is the floor, not the ceiling.
For the current rules on casual employment and the employee choice pathway, see /blog/casual-conversion-rules-2026/.
Common mistakes in labour hire agreements
Mistake 1: Using a generic services agreement.
A website hosting contract template will not cover PCBU duties, labour hire licensing, or casual employment rules. Start from a labour hire-specific template.
Mistake 2: Leaving the charge-out as a single blended figure.
Without the line-item breakdown, every invoice review becomes a negotiation. Get it in writing at the start.
Mistake 3: Silent on back-fill.
No SLA means no accountability. Expect poor service.
Mistake 4: Over-broad indemnities.
Some provider templates try to shift all WHS liability to the host. Remember both parties are PCBUs. Balance the indemnities.
Mistake 5: Ignoring the licensing scope.
If the provider’s licence does not cover your industry, your arrangement is exposed regardless of what the agreement says.
Mistake 6: Auto-renewal without review.
Build in a rate review trigger and a service review before renewal.
Free labour hire agreement template
We have built a labour hire agreement template containing:
- All 7 clauses above, drafted for Australian employers in 2026
- Schedules for site details, roles, and charge-out rates
- A sample SLA schedule with fill rate, on-time start, and back-fill targets
- A certificate-of-currency checklist
- Notes on state-by-state licensing obligations
Download the template from our forms page by entering your work email. The download is free. We use your email to send the template and follow up once with a short note. You can unsubscribe at any time.
Read Also:
Labour Hire Licence Victoria: The Complete Guide for Employers
Labour Hire vs Contractor: Legal, Tax, and Practical Differences
Important: The template is a starting point. It is not legal advice. For any arrangement above a modest annual value, have the final version reviewed by a lawyer familiar with labour hire law in the state where your sites operate.
Takeaways
- A labour hire agreement is a commercial contract between host and agency, not an employment contract with the worker.
- Seven clauses are non-negotiable: scope, rates, supervision, WHS, replacement, termination, and indemnity.
- Line-item charge-out pricing prevents invoice disputes and helps audit compliance.
- Both host and agency are PCBUs. WHS duties cannot be contracted out.
- Fair Work looks at the substance of the relationship, not just the agreement.
- Download the template to start, but have a lawyer review before signing on any material engagement.
Ready to review your labour hire agreement?
Wise Recruitment and Consulting works under transparent, itemised agreements with every host business. Warehouse, forklift, food processing, and manufacturing workers across Melbourne and Sydney. Licensed in Victoria (VICLHL10427). Request a quote for labour hire or call 1300 021 673.
Frequently Asked Questions
It should include 7 core clauses: scope of services, charge-out rates with line-item breakdown, supervision and control, work health and safety responsibilities, worker replacement and back-fill SLA, termination and notice, and indemnity and insurance. Plus schedules covering sites, roles, rates, and service levels.
Yes. Most Australian labour hire engagements of any scale are documented in writing. In licensed states (Victoria, Queensland, SA, ACT) the labour hire provider must hold a licence, and insurers and regulators expect a written agreement. A handshake arrangement is exposed on WHS, tax, and dispute grounds.
Yes. Many host businesses prefer a rolling 30-day notice arrangement rather than a 12-month lock-in. The commercial terms still need to be in writing even if the term is monthly. Month-to-month gives flexibility; a fixed term can secure better pricing. Model both before you sign.
Usually the labour hire provider presents their standard template. The host business should review, mark up, and negotiate. For material engagements both parties should have the final version reviewed by a lawyer. Do not accept “standard terms” at face value. The agreement is negotiable.
No. A contractor agreement engages an individual or a company to deliver a defined scope for a fee, with no employer-employee relationship. A labour hire agreement engages an agency to supply workers who are the agency’s employees. The legal treatment, the tax treatment, and the WHS duties are different.
At minimum, $20 million public liability, $5 million professional indemnity, and current workers compensation in every state where workers are placed. Request certificates of currency at signing and at each renewal. Without current cover, the host is holding risk the insurer was supposed to carry.
No lock-in Contracts
Payroll and Compliance handled by us
We respond within 2 business hours