How Recruitment Agencies Work: A Guide for Employers
How recruitment agencies work comes down to one idea: an agency finds, screens and presents candidates, then either hands them to you as permanent hires or employs them itself and supplies them to your site. This guide is for employers and job seekers, and it covers agency types, the placement process, pay and super obligations, licensing and what to ask before you sign.
- A recruitment agency sources and screens candidates for permanent roles, while a labour hire or temp agency employs workers and places them with host businesses.
- Labour hire workers are employed by the provider, so the provider pays wages, super at 12% of ordinary time earnings and leave entitlements.
- NSW has no labour hire licensing scheme, but Victoria, Queensland, South Australia and the ACT do, so check where the work happens.
- Always ask how fees are charged, what the guarantee covers and who carries workers compensation before you sign a service agreement.
What is how recruitment agencies work?
An Australian staffing agency is a business paid to match people with jobs. It may charge a fee when a candidate is hired, charge an hourly margin on a worker it employs, or run your hiring process for you.
The model you choose decides who the employer is, who carries the payroll risk and how quickly someone can start. Most readers searching what is an agency want exactly that distinction.
| Term | Meaning | Why it matters |
|---|---|---|
| Recruitment agency | A business that sources, screens and presents candidates for permanent or contract roles, usually for a placement fee. | The worker becomes your employee, so you carry pay, super and leave from day one. |
| Labour hire provider | A business that employs workers and supplies them to host businesses for an hourly charge. | The provider is the employer and pays wages, super and workers compensation. |
| Temp agency | A labour hire or staffing agency that supplies short-term workers to cover peaks, absences or projects. | You get fast cover without adding permanent headcount. |
| Host employer | The business that directs the day-to-day work of a labour hire worker on its site. | You share work health and safety duties with the provider. |
| Outsourced recruitment (RPO) | An agency that runs part or all of your hiring process as an ongoing service. | It suits businesses hiring regularly without an in-house team. |
| Placement fee | The amount an agency charges when a candidate it introduced accepts a permanent role. | Terms, guarantees and refund periods differ, so read the agreement. |
How recruitment agencies work for employers and workers
The same agency can act differently depending on the arrangement. Check who signs the employment contract before you assume anything about pay or leave.
| Situation | Who the employer is and what applies |
|---|---|
| Permanent placement | You employ the candidate directly. The agency's job ends once the person starts, apart from any guarantee period in its agreement. |
| Temporary or labour hire worker | The agency employs the worker and pays wages and super. You direct the work on site and share work health and safety duties. |
| Casual agency worker | Paid the award or agreement rate with the casual loading, usually 25%, and no paid annual or personal leave. |
| Part-time agency worker | Paid the same hourly rate as a full-timer in the role, with leave pro rata. Minimum engagement rules come from the award or agreement. |
| Independent contractor | Not an employee, but an ABN does not decide the question. The Fair Work Ombudsman and ATO have tools to test the real relationship. |
| Job seeker | Registers with the agency for free and should never be asked to pay to be placed in work. |
Most private-sector employers are in the national system under the Fair Work Act 2009 (Cth). NSW state public sector employees, and some local government employees, are covered by the NSW state system.
Rates, pay and entitlements in an agency arrangement
Agency workers have the same minimum entitlements as any other employee. These are the current figures, and each applies from the date shown.
| Item | Figure | Applies from |
|---|---|---|
| National minimum wage, hourly | $26.44 | First full pay period starting on or after 1 July 2026 |
| National minimum wage, 38-hour week | $1,004.90 | First full pay period starting on or after 1 July 2026 |
| Casual minimum, hourly (includes 25% loading) | $33.05 | First full pay period starting on or after 1 July 2026 |
| Modern award minimum rates | Up 4.75% | First full pay period starting on or after 1 July 2026 |
| Super guarantee | 12% of ordinary time earnings | 2026-27 |
| Payday super timing | Within 7 business days of payday | 1 July 2026 |
| Payslip timing | Within 1 working day of payday | Current rule |
| Pay record retention | 7 years | Current rule |
Award rates are usually higher than the national figure. Check the free Fair Work Ombudsman pay guide for the award and classification that applies to the placement.
How recruitment agencies work step by step
A Monday-morning briefing call is often where a good placement starts or a poor one goes wrong. The steps below follow a typical engagement from brief to review.
- Brief the agency on the role, location, award, start date, licences such as a white card, and the site induction a worker will need on day one.
- Agree the commercial terms in writing, including whether you pay a placement fee or an hourly charge-out rate, plus any guarantee period.
- The agency sources candidates from its database, job boards and referrals, then screens them for experience, availability, right to work and relevant tickets.
- You receive a shortlist or a worker allocation, interview or approve the candidates, and confirm the pay rate and classification before anyone starts.
- For labour hire, the agency employs the worker, issues the contract and pays wages and super, while you induct the worker and sign off timesheets each week.
- Review performance after the first shift or first month, give feedback to the agency and replace or extend the arrangement as agreed.
| Worked example | What happens |
|---|---|
| Casual labourer on the national minimum | The base rate of $26.44 plus the 25% loading gives the $33.05 hourly minimum. The agency pays that rate for every hour worked. |
| Super on that wage | The agency adds 12% of ordinary time earnings on top of wages and pays it so it reaches the fund within 7 business days of payday. |
| Host employer's weekly check | You sign the timesheet, and the agency issues a payslip within 1 working day of payday. |
Employer checklist before you use a recruitment agency
Whether you hire direct or through a provider, a short checklist protects both sides. These items also help you compare agencies fairly.
- Ask for the legal entity name and ABN, then confirm who employs the worker and who invoices you for each placement.
- Request written confirmation of workers compensation cover, since NSW employers generally need an icare policy once wages pass $7,500 a year.
- Check how the agency screens candidates, including right to work, reference checks and police checks that need the candidate's written consent.
- Confirm the award and classification used to set pay, and ask to see the pay guide rate rather than relying on a verbal quote.
- Agree who inducts and supervises the worker, because the provider and the host share work health and safety duties under the Work Health and Safety Act 2011 (NSW).
- Read the placement fee, guarantee and conversion terms, including what happens if you hire a temporary worker directly.
- Keep signed timesheets for the 7-year record period so you can resolve any pay query quickly.
- Ask how the agency will respond to a safety incident, a no-show or a complaint, and who you call out of hours.
Temp agency guide: how temporary staffing works
Temporary agencies cover absences, seasonal peaks and short projects. The worker is on the agency payroll, which keeps your headcount flexible.
- Use temp workers for a defined gap, such as parental leave cover or a shutdown week, and set an end date or review point in writing.
- Expect the agency to charge an hourly rate that covers wages, super, insurance and its margin, so compare the full charge-out rate.
- Ask about conversion terms before you offer a temp a permanent job, since some agreements include a fee or a minimum placement period.
- Remember that long-term casuals can ask to convert after 6 months, or 12 months with a small business employer, under the casual conversion rules.
- Rotate your induction content so each new temp learns site rules, emergency procedures and reporting lines on the first shift.
Our temp agency guide explains rates, contracts and rights in more detail.
Healthcare and aged care staffing agencies
Care providers use agencies to fill rosters at short notice, but credentials and screening matter more here than in most sectors.
- Verify registration, qualifications and immunisation records before a worker starts a shift, and keep copies on file.
- Confirm that the worker has a current national police check and, for child-related work, a Working with Children Check.
- Check the applicable award and classification, because penalty rates for nights and weekends can change the real cost of a shift.
- Agree how handover, incident reporting and clinical supervision work for agency staff on your floor.
- Plan for continuity of care by requesting the same agency workers for repeat shifts where you can.
See our guide to healthcare and aged care staffing for the sector detail.
Outsourced recruitment: RPO and managed hiring
Recruitment process outsourcing hands part or all of your hiring to an external team. It suits businesses with steady or seasonal hiring but no in-house recruiters.
- Decide which stages to outsource, such as job ads, screening, interviews or onboarding, and keep final approval with your own manager.
- Set measures you can check, including time to shortlist, candidate quality and the share of hires still in the role after probation.
- Ask who owns candidate data and how the provider handles privacy and consent for background checks.
- Compare a monthly service fee with per-placement fees to see which works for your hiring volume.
- Write exit terms into the agreement so you keep your job descriptions, templates and talent pool if you leave.
Read more about outsourced recruitment and RPO before you compare providers.
Recruitment agency fees and who pays
Fees are the first question most employers ask, and the answer depends on the model. There is no standard national price, so any figure here is indicative only (indicative — get quotes from at least three agencies).
- Permanent placement fees are usually a percentage of the candidate's first-year package, and the agency states the rate in the service agreement.
- Labour hire charge-out rates are hourly and cover wages, super, insurance and the agency's margin, so ask for a breakdown.
- Job seekers should not be charged to register or to be placed, and you should question any agency that asks for payment.
- Guarantee or replacement periods differ, so check what is covered if a candidate leaves or is dismissed early.
- Ask whether introduction fees apply if you hire a candidate the agency showed you months earlier.
Our guide to recruitment agency fees shows how to compare quotes.
Labour hire licensing and how recruitment agencies work across states
Licensing depends on where the work is done. Check the rules for each state your workers will be placed in.
- Victoria, Queensland, South Australia and the ACT have labour hire licensing schemes, and hosts in those places should use licensed providers.
- NSW has no labour hire licensing scheme, according to the NSW Government, which is working with other jurisdictions on a nationally consistent approach.
- Victoria's expanded fit and proper person and financial viability rules started on 1 June 2026.
- Newly covered South Australian providers had to hold a licence by 29 July 2026.
- A Fair Work Commission regulated labour hire arrangement order may require the same pay as host employees in some cases.
Our guide to labour hire licence requirements in Australia lists each scheme, and what is labour hire explains the model. For building sites, see construction labour hire.
Common mistakes to avoid when using a recruitment agency
- Signing a service agreement without reading the fee, guarantee and conversion terms, then facing an unexpected invoice when you hire a temp directly.
- Assuming the agency handles all safety duties, when the host employer still has to induct, supervise and manage site risks.
- Paying a flat rate that hides the casual loading, or ignoring penalty rates that the award requires for nights and weekends.
- Skipping right to work and licence checks on the first day, such as a white card left at home by a labourer.
- Treating a worker as a contractor because they have an ABN, without testing the real working relationship.
- Choosing an agency on price alone, without asking about insurance, screening and how quickly it can replace a no-show.
How recruitment agencies work FAQ
What is an agency in recruitment?
An agency is a business paid to find and supply workers. A recruitment agency usually places candidates in permanent jobs for a fee, while a labour hire or temp agency employs the workers and charges the host business an hourly rate.
How do recruitment agencies work for employers?
You brief the agency, agree fees in writing and review a shortlist or worker allocation. For permanent roles you employ the candidate, and for labour hire the agency stays the employer and handles pay, super and insurance.
Who pays the recruitment agency?
The employer or host business pays the agency through a placement fee or hourly charge-out rate. Job seekers should not pay to register or be placed. Always check the service agreement, because fee and guarantee terms vary between agencies.
Do agency workers get super and leave?
Yes. The super guarantee is 12% of ordinary time earnings for 2026-27. Permanent and part-time workers get NES leave, while casuals get the 25% loading instead of paid annual and personal leave.
Do you need a licence to run a labour hire agency?
It depends on the state. Victoria, Queensland, South Australia and the ACT have licensing schemes. NSW has no labour hire licensing scheme, but providers must still meet workplace, safety and insurance laws.
How long do I need to keep agency pay records?
Employers must keep time and wage records for 7 years and give payslips within 1 working day of payday. As a host, keep signed timesheets for the same period so you can resolve any pay query.
Next step: choose an agency that fits your site
List the roles, award and start date, then ask two or three agencies for written terms and compare them side by side. At TQN Personnel, we supply screened and inducted labour hire workers across Sydney, and you can talk to our team about your next placement. This is general information, not legal, tax or financial advice, so check the Fair Work Ombudsman, the ATO or an employment lawyer for your situation.