June 11, 2018
Professionals | QLD
You may have noticed the Queensland Government’s recent advertising blitz concerning the Labour Hire Licensing Act 2017 (Qld) (Act) which established a mandatory licensing regime on providers of labour hire services. The Act also imposes obligations on users of labour hire services to only engage workers from licensed providers.
The labour hire licensing regime commenced on 16 April 2018. However, there is a 60 day transition period that ends on 15 June 2018, giving existing providers and consumers time to comply with the regime.
Despite its name, the Act may apply to arrangements that many consider non-traditional labour hire service providers such as intragroup service entity arrangements.
What is an intragroup service entity arrangement?
An intragroup service entity arrangement typically has the following hallmarks:
- person (A) carries on a business or a professional practice;
- person (B) takes on a business of providing services, which may include staff hire, administrative support etc.;
- there is generally a level of common ownership between A and B;
- A engages B in providing services, which may include the supply of staff to provide clerical and administrative support services to A; and
- A pays B a fee, generally linked to the costs incurred by B to give the staff and services to support A.
When is an intragroup service entity required to be licensed under the Act?
Unless an exception to the licensing obligation applies, all intragroup service entities that provide workers to a trading entity are required to be licensed under the Act.
An intragroup service entity that provides workers to a trading entity is not required to be licensed under the Act where the service entity and trading entity are each part of an entity or a group of entities that carry on one recognisable business.
Unfortunately, the Act and its supporting regulations do not define when a provider and user of workers are carrying on one recognisable business. Further, the supporting material provided by the Queensland Government is not helpful, however as best, we can ascertain, the following factors may indicate when persons are carrying on one recognisable business for the Act:
- how the entities market themselves – i.e. makes only one entity trade, or if multiple trading entities do they trade under a similar business name, one ABN etc.;
- where there is a group structure with various trading entities and a service entity if the services offered by the trading entities complement each other; and
- common ownership between the service entity and the trading entity or entities is not required.
Further opportunities exist to exclude a service entity from the licensing regime if the service entity acts as a genuine subcontractor to the trading entity, rather than supplying workers to perform work. This would require a review of the service or contractor agreement between the service entity and the trading entity.
Why is compliance important to your business?
Failure to comply with the labour hire licensing regime has significant consequences for users and providers of labour hire services, including:
|Providing labour hire services without a license||Individual - $130,439.10 or 3 years imprisonment
Corporation - $378,450
|Using labour hire services from a non-licensed provider||Individual - $130,439.10 or 3 years imprisonment
Corporation - $378,450
For related party intragroup service entity arrangements, there is scope for double penalties to apply to the group, that is, both the provider and the user of the services could be penalised.
How can McInnes Wilson Lawyers help?
- Review of service and contractor agreements to determine whether they fall within the scope of the Act.
- Review the activities of service entities to decide whether or not they are excluded from the licensing obligations imposed by the Act.
- Review the terms of service entity arrangements to determine whether they are excluded from the scope of the Act.
- Assisting with applications for labour hire service licenses.
- Drafting service and contractor agreements that include assurances that the provider of labour hire services meets the licensing requirements.