Why do Labour Hire Companies Charge so much?

Why do Labour Hire Companies Charge so much?

Labour hire companies assume the role of the employer. They find the workers, interview them and send them directly to you. In exchange, you, the host employer, will pay the agency a fixed fee made up of taxes, insurance, statutory charges and other miscellaneous fees. The overall goal is to get you the skilled workforce you need without having to find the workers yourself.

The problem most companies have with recruitment agencies is that their fees hike up the cost per employee, making the agencies appear far more expensive than they actually are. Most agencies will charge you approximately $30 per hour per employee, while you may only be willing to pay around $20 per hour per employee. With a $10 difference, why would anyone hire a labour company? Surely there must be a reason.

So, why do labour hire companies charge so much? Let us break down the actual hiring costs and compare them.

What it actually costs to hire a labour agency

To show the difference between doing the hiring yourself and using an agency, let’s look at some of the costs of both scenarios. The numbers we use are considered average, but they may vary depending on your business and where you are located.

Base wage $20.00
Post-Payroll Costs:
Superannuation (9.5%) $1.90
Payroll Tax (5%) $1.00
Sick Leave (4.3%) $0.86
Annual Leave (8.6%) $1.72
Public Holidays (4.3%) $0.86
Parental Leave (1%) $0.20
Long Service Leave (1.9%) $0.38
Insurance costs:
Public Liability Insurance (2%) $0.40
WorkCover (3%) $0.60
Additional Business Costs (provided by Labour Hire):
Payroll Costs ($350/yr) $0.20
Protective Equipment ($250/yr) $0.14
Total: $28.26

That total is the amount of money your company would pay each worker if you directly employed him or her instead of going through the labour hiring agency. That’s only $2.74 difference from what your labour agency wants to charge you, and their cost ($30) is all inclusive. Do not be fooled when looking at the sticker price alone ($20 v. $30). It can be misleading.

Using these percentages set up the math and see what benefits that $2.76 might be getting you. As a manager, you might not have to wear so many hats in your position. If you feel as if you are handling too many jobs, letting someone else handle the labour might free up some time to devote to other matters. The stress relief the agency might give you could make up for the $2.76, and you might find yourself be more productive as a result.

Benefits of hiring a labour hire agency

Now that it is clear that labour hiring agencies could be a worthwhile investment, let’s look at a few more benefits that labour hiring agencies offer their clients.

Great flexibility

Whether you are a small or large company, agencies allow you the flexibility to plan for any type of workforce you need. If your company is having a slow week, inform the agency that you do not need as many workers. They will place more people on call, and you will not waste money on unnecessary labour.

If your company is small and looking to expand, an agency allows you to virtually grow overnight. Big contracts can come in with little warning, and you need to have the labour force ready to go. This will allow much smaller companies to plan for much bigger contracts and expand their businesses.

No commitment

During peak season, you need a well-trained staff to meet your company’s demands, but what about in the off seasons? You do not want to pay for labour you do not need and you will not use, but you might feel uncomfortable firing so many people when you may need them again sooner rather than later.

Labour hiring agencies offer the benefit of being non-committal. You can increase and decrease your force as needed, and you do not have to keep employees on for a set amount of time. This also works in your favour if one of the labourers does not seem to get along with your company. You can request that your agency not send that particular labourer next time.

interview-applicant

One-off assignments okay

Some assignments only come around once or twice a year, and the workload requires double the usual staff you have. When labour hiring agencies, your expanded workforce will be ready to go, and after the job is complete, you no longer have any obligation to keep the extra labourers on call.

Unattached HR

The hiring process is long and sometimes complicated. Your human resources department advertises for new labourers, and then spends hours and hours checking CVs, interviewing candidates, calling references and performing background checks, and after all that, the new hire quits a month later.

This is a frustrating process, but if you are working with a labour hiring agency, they take care of this step for you. You no longer have to worry about turnover rates or reference checks. All of this is handled by the agency.

Unattached payroll and administrator

Not all companies have an easily understood payroll schedule. Managing sick and holiday time as well as adding up timesheets can be especially difficult for hourly employees, and keeping track of an expanding and contracting labour force can be difficult.

All staff questions and issues are handled by the agency. They file all the paperwork and your labour force will go to them with any payment questions. You do not have to worry about making sure everyone’s pay cheques are correct. You simply handle paying the agency.


At first glance, labour agencies seem like they charge exorbitant amounts for work that you could do internally, but when you look at the actual costs, it is clear that you are getting much more out of the small added cost. You no longer have to worry about the hiring process, and you can easily expand and shrink your workforce almost overnight.

A great hiring agency might be just what you need to take your business to the next level.

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