Labour Hire: Understanding What's Included in Our Hourly Rate

Understanding Labour Hire Rates

It's a common frustration within the recruitment sector, and one that can cause unnecessary tension between candidates, clients, and agencies. If you're looking to use labour hire staff, you might wonder why there's a gap between what you pay and what the worker receives.

This article provides a transparent breakdown of what goes into our hourly rates, helping you understand the true value of on-hire staffing and make informed decisions for your organisation.

Cost Breakdown

When you engage a labour hire worker through an agency, the hourly rate you pay covers multiple components. Here's where your money goes:

Base Wage Component

The largest component is the worker's base wage, determined by the applicable award or agreement. For education roles, this is typically the Educational Services (Post-Secondary Education) Award or similar. This ensures workers receive fair, legal compensation.

Oncosts & Entitlements

Beyond the base wage, employers must fund various entitlements:

• Superannuation – Currently 11.5% of ordinary time earnings (increasing to 12% by 2025)
• Annual leave – 4 weeks per year, plus 17.5% leave loading
• Sick/personal leave – 10 days per year
• Public holidays – Paid when they fall on a rostered day

Compliance & Insurance

Significant costs go toward protecting both the worker and your organisation:

• Workers' compensation insurance – Covers workplace injuries. Rates vary by state and role risk profile.
• Public liability insurance – Typically $20 million coverage for third-party claims.
• Professional indemnity insurance – Protects against professional negligence claims.
• Payroll tax – State-based tax on wages above the threshold (varies by state, typically 4.85–6.85%).

Agency Margin

The agency margin covers the cost of delivering the service:

• Recruitment and screening – Finding, interviewing, and vetting candidates
• Compliance management – Verifying qualifications, Working with Children Checks, and industry currency
• Payroll administration – Processing pay runs, managing tax, issuing payment summaries
• HR support – Handling queries, performance issues, and workplace relations
• Ongoing support – Regular check-ins, issue resolution, and quality assurance

The Value Proposition

When you compare the total cost of employing staff directly versus using labour hire, the gap is often smaller than it appears. Consider what you save:

• Recruitment advertising and time spent interviewing
• Onboarding and training administration
• Payroll processing and compliance management
• Leave liability (annual leave, long service leave)
• Termination costs and redundancy risk
• Workers' compensation claims management

For many RTOs, the flexibility, risk reduction, and administrative simplicity of labour hire makes it an attractive option – especially for project work, leave coverage, or managing fluctuating enrolments.