Labour Hire Charge Rates Explained: What You Pay For

A labour hire charge rate is the hourly amount a host business pays the provider for each worker. It is not the worker’s wage. It covers the wage, the loadings and allowances the award or agreement requires, the on costs that every employer carries, such as superannuation, WorkCover, payroll tax and, in construction, portable long service leave, the provider’s insurance and compliance costs, and finally a margin. When two quotes for the same worker look far apart, the gap is usually in one of those layers, not in the wage.

This article breaks the rate into its parts so a site manager, operations manager or estimator can read a quote properly and compare like with like. It is written for civil contractors, manufacturers and distribution centres in Victoria. It does not publish Bluestone’s own rates, which are quoted per job, and the exact on cost percentages vary by provider, industry and the size of the business.

The layers

What sits inside a charge rate

From the bottom up, each layer is built on the one below it.

The wage

The base hourly rate for the worker’s classification under the modern award, or a higher rate where an enterprise agreement or a same job same pay order applies. A casual employee also receives a casual loading, which under most awards is 25 per cent, in place of paid leave.

Penalties and allowances

Overtime, shift and weekend penalties, and allowances such as site, industry, tool, fares and travel or leading hand allowances where the award or agreement requires them. These change with the hours and the site, so they are often quoted separately.

Statutory on costs

Superannuation guarantee, currently 12 per cent and now paid with each pay run, WorkCover premium, payroll tax once the provider’s total wages pass the Victorian threshold, and for covered construction work the portable long service leave levy paid to LeavePlus.

Running and compliance costs

Public liability and other insurances, the labour hire licence and its annual reporting, ticket and right to work checks, inductions, personal protective equipment, payroll processing, and the people answering the phone at 5.30 in the morning.

Working capital and margin

Workers are paid weekly, while hosts usually pay on trading terms, so the provider funds wages in between. What is left after all of the above is the margin, which covers the risk the provider carries and keeps it in business.

Workers in high visibility clothing and safety gear on site

What moves the rate

Why the same role can be quoted at different rates

These are the honest reasons two quotes differ. A missing layer is the dishonest one.

Award and classification

A civil labourer under the construction award and a process worker under the manufacturing award start from different base rates

Enterprise agreements

Where your agreement rate applies to labour hire workers, the wage and every on cost built on it rise together

Industry risk

WorkCover premiums follow the industry the work is in, so civil and manufacturing placements carry more than light warehouse work

Hours and shifts

Night shift, weekends, overtime and minimum engagement periods all change the effective hourly cost

Tickets and experience

A ticketed dogman or an operator with verified machine competencies is a smaller pool and a higher classification

Volume and duration

A steady crew for months costs less to run per hour than one worker booked for a single day at short notice

Comparing quotes

How to compare two labour hire quotes

Make sure both quotes are for the same classification, award or agreement, and the same mix of ordinary and overtime hours.
Check whether the rates are quoted before or after GST.
Ask whether superannuation, WorkCover, payroll tax and, for construction work, the portable long service leave levy are inside the rate or added later.
Ask how overtime, weekend and night work are charged, and whether allowances are passed through at cost or built into the hourly figure.
Ask whether the workers are casual employees or ABN contractors, because the obligations sit differently and a very low rate can mean someone is carrying risk they should not.
Ask about minimum engagement periods and what you are charged if you send a worker home early because of weather.
Confirm the provider holds a current Victorian labour hire licence. An unlicensed provider is cheaper because it is skipping costs a licensed one cannot.

A quote that comes in well under the others for the same role is worth a second look. Wages and statutory on costs are set by law, so a much lower rate usually means a layer has been left out, or the worker is being engaged in a way that does not match the work.

Reading the margin

Why the margin is smaller than it looks

Hosts often compare the charge rate with the hourly wage the worker is paid and assume the difference is profit. It is not. Superannuation, WorkCover and payroll tax are calculated on the wage, so they take a sizeable share of the gap before anything else is counted. Insurance, licensing, checks, payroll and the cost of funding wages before the invoice is paid come next. The margin is what remains, and on short or irregular bookings it is often thin.

That is also why a rate is built from the fully loaded cost of the worker, not from the wage. A provider that quotes a fixed amount above the wage, without accounting for the on costs that rise with it, ends up either losing money on overtime and night shifts or cutting corners somewhere else. Neither helps the host.

Rates also move during a job. Award wages are reviewed each year with increases usually starting from 1 July, a same job same pay order can lift the wage to your agreement rate, and changes to superannuation or payroll tax flow through. A good provider tells you before a rate changes and shows which part has moved.

Bluestone Labour Group quotes each job on the role, the award or agreement, the hours and the site, and explains the layers above on request. We supply civil labourers, warehouse staff and production workers under Victorian Labour Hire Licence VICLHL11535. For how an order can change the wage, see our guide to same job same pay for labour hire, and for how contractor and casual engagements differ, see contractor or casual employee.

Questions

Frequently asked questions

A charge rate covers the worker’s wage for their classification, casual loading where it applies, penalties and allowances, statutory on costs such as superannuation, WorkCover, payroll tax and, for construction, the portable long service leave levy, the provider’s insurance and compliance costs, and the provider’s margin.

Because the wage is only the first layer. Superannuation, WorkCover and payroll tax are calculated on the wage, and the provider also carries insurance, licensing, ticket checks, payroll and the cost of paying workers before the host’s invoice is paid. The margin is what is left after all of that.

Most business to business labour hire quotes are given before GST, with GST added on the invoice. Check the quote, because comparing a rate that includes GST with one that does not makes the first look more expensive than it is.

Wages and statutory on costs are set by law, so a much lower rate usually means something has been left out, such as superannuation, WorkCover or payroll tax, or that workers are engaged as contractors when the work looks like employment. Ask what is inside the rate and check the provider’s labour hire licence.

See all labour hire services

What You Pay For in a Labour Hire Rate