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The labour hire industry has gained momentum in New Zealand in the last decade due to its many benefits for businesses. However, it has also  had a bad reputation to the negative public perception that labour suppliers do not treat workers fairly. If you are considering starting a labour hire business in New Zealand, it is crucial to understand your legal obligations. This way, you can create strong agreements with your clients and workers, and avoid potential disputes. This article will explain:

  • what a labour hire business is;
  • how to get accredited in New Zealand; and
  • how to draft your legal agreements.

What is a Labour Hire Business?

Unlike a recruitment company, a labour hire business (also known as a triangular employer) directly employs workers on behalf of other organisations (hosts businesses) when they need extra staff. As a result, it develops a working relationship with their candidates or workers. It also is responsible for ensuring that the host businesses provide workers with their employment rights.

A recruitment company, on the other hand, receives a specific job description from the hiring organisation and looks for suitable candidates. Therefore, when the hiring organisation employs the candidate, they become the employer, and the relationship between the recruitment company and the candidate ends.

The Merits of a Labour Hire Business

Some of the challenges faced by host businesses include: 

  • not having adequate HR or payroll in-house;
  • struggling to deal with unions;
  • needing to resource short term projects; and
  • having seasonal demand. 

A labour hire business generally addresses these challenges by offering: 

  • access to a broader pool of talent;
  • access to on-call experts;
  • people for projects with target end dates; 
  • access to international skills; and 
  • temp to permanent labour.

These solutions offer many benefits to host businesses, including:

  • improving their productivity and cash flow; 
  • saving time recruiting; 
  • reducing fixed overheads, compliance and administration costs; and 
  • building extra capacity in their organisation. 

Labour Hire Accreditation in New Zealand

If you are thinking of starting a labour hire company, you do not need to obtain any accreditation or licences to operate, unless you are planning to work in the construction sector in the Canterbury region. However, you may want to consider voluntary accreditation, as this offers some benefits, such as the ability to get your migrant employees (including lower-skilled roles) a three-year visa.

How to Obtain Your Accreditation

If you want to obtain accreditation for your labour hire business, you need to meet a series of requirements, including:

  • having a good history of compliance with employment law and Immigration New Zealand;
  • satisfying specific industry or regulatory standards; and
  • being in a financially sustainable position.

In addition to this, you need to be willing to train and upskill New Zealanders and increase wages and conditions for workers. You can find out more information on the Immigration New Zealand website, including how much it costs. Your accreditation lasts for twelve months. 

Your Employment Agreements

Due to the nature of the relationship between a labour hire business, host business and candidate or worker, it is crucial to outline, in as much detail as possible, the legal obligations of each party. For example, you should define:

  • how the host business will request workers; and 
  • who will take on insurance and what it will cover.

Tip: Host businesses often require complete discretion for when and how long they engage a worker. This allows them to request an alternative worker if they have any issues with the worker.

If you need to draft a labour hire employment agreement, the Employment New Zealand’s agreement builder can be an excellent place to start. However, due to the strict regulations surrounding this industry in New Zealand (such as the Triangular Employment Amendment Act), you may want to consider getting them reviewed by an employment lawyer.

Key Takeaways 

As a labour hire business, you directly employ workers on behalf of other organisations. In New Zealand, you are not required to obtain any accreditation or licences to run your business. This is unless you are planning to operate in the construction sector in the Canterbury region. If you want to obtain accreditation from Immigration New Zealand, you need to meet a series of requirements. You also need to renew your accreditation every twelve months. Your labour hire agreement should detail how the host business engages your business and how you supply workers to them. If you need assistance setting up your business or drafting your legal agreements, contact LegalVision’s employment lawyers on 0800 005 570 or fill out the form on this page.

FAQs

What is a labour hire company?

A labour hire business (also known as a triangular employer) directly employs workers on behalf of other organisations (hosts businesses) when they need extra labour. As a result, it develops a working relationship with their candidates or workers.

Does a labour hire business need accreditation in New Zealand?

You do not need to obtain any accreditation or licences to operate, unless you are planning to work in the construction sector in the Canterbury region.

What is a labour hire agreement?

Due to the nature of the relationship between a labour hire business, host business and candidate or worker, it is crucial to outline, in as much detail as possible, the legal obligations of each party in your agreement.

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