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Finding new talent in any industry can be a long and tiring process, but it’s also one of the most important parts of running a business. Realistically speaking, it’s not always possible to invest the right time and money into your recruitment process.
Thankfully, there are solutions available in 2025 that can make sourcing candidates a whole lot easier. A common question we receive is, “Am I running a recruitment agency or a labour hire firm?”
While these models might appear similar at first glance, some key differences will help you decide which structure best aligns with your business goals. Every business owner has unique preferences, resources and objectives, so it’s vital to choose the structure that works best for your organisation. For additional insights, our guides provide a wealth of up‐to‐date information on establishing your business correctly.
What’s The Main Difference?
At their core, both recruitment agencies and labour hire firms simplify the process of hiring new employees by doing much of the legwork for you.
In both models, these firms proactively search for the best candidates to match your specific needs; from there, you choose the candidates who best fit your criteria. However, the key difference lies in post-placement involvement. A recruitment agency will ‘hand over’ the candidate to you once they are hired, whereas a labour hire firm maintains an ongoing relationship with the employee, managing aspects such as wages and entitlements on your behalf.
Let’s examine these differences in more detail.
Recruitment Agencies
Recruitment agencies typically attract potential candidates for their client businesses by advertising roles with detailed job descriptions. They target candidates with the precise skills, experience and qualifications needed – a process that in 2025 has been significantly enhanced by advanced data analytics and AI-driven screening techniques. Learn more about modern hiring practices here.
To better understand the process, let’s look at it step by step:
- The client (the business) sends a detailed job description to the recruitment agency.
- The agency filters a pool of candidates, selecting those with the right skills, experience and qualifications.
- Once the best candidates are identified, the agency arranges final interviews with the client.
- The successful candidate(s) are then hired directly by the client, who pays a ‘finder’s fee’ to the recruitment agency.
At this point, the recruitment agency’s role is complete, and the client takes over responsibility for managing the employee’s wages and entitlements. In essence, the agency handles the candidate screening process, after which the employee works solely for the client. For more in-depth information on setting up robust recruitment processes, check out our recruitment business legals page.
| Example New Hires Pty Ltd is a recruitment agency based in London. They received a request from one of their clients, a law firm called XY&Z, which needed a part-time paralegal to work three days a week – requiring at least two years of completed legal education. Lisa, a dedicated third-year law student, spotted the job advert and contacted New Hires. After reviewing her CV, they determined she was an ideal candidate. New Hires then arranged an interview between Lisa and XY&Z. Impressed with her performance, XY&Z decided to offer her the role. They paid New Hires a finder’s fee and managed the onboarding process independently, including salary negotiations and employment contract arrangements. Subsequently, Lisa became employed exclusively by XY&Z. |
Labour Hire Firms
Labour hire firms follow a similar recruitment approach, but with a significant difference: they maintain an ongoing relationship with the candidate even after placement. In 2025, this model has become increasingly popular for businesses that need rapid, flexible staffing solutions.
In practice, labour hire firms not only recruit and train candidates tailored to specific client needs but also remain as the employer responsible for managing the employee’s wages, entitlements, training and insurance. With project demands and short-notice fill requirements on the rise, this model ensures that you have access to a pool of ready-to-deploy talent. For further reading on compliant labour hire practices, have a look at our Labour Hire Agreement guide.
To clarify the process:
- Labour hire firms recruit and comprehensively train employees in accordance with client requirements.
- The employees are formally employed by the labour hire firm.
- When a client requires short-term or emergency staffing, the firm deploys the most suitable candidate from its pool.
- Throughout the assignment, the firm manages wages, entitlements and necessary insurances.
This ongoing connection offers enhanced flexibility and responsiveness to sudden staffing challenges. To gain further insights into how this model works in today’s dynamic environment, you might also wish to explore our sections on remote work policies and employers’ liability.
| Example Tim is employed by Star Agency, a well-established labour hire firm that specialises in connecting exceptional copywriters with leading marketing firms. One of their long-term clients, A&B, urgently needed a junior copywriter for a short-term project starting the following week. Thanks to his recent training and experience in digital marketing, tailored for industries like A&B, Tim was identified as the perfect candidate. Star Agency promptly forwarded his CV and highlighted his readiness for immediate deployment. A&B agreed to have Tim work on the project. Throughout the engagement, Star Agency continued to manage his wages, entitlements and insurance, ensuring a smooth and efficient placement. |
Which Option Is Better For Me?
If you’re unsure whether to operate as a recruitment agency or a labour hire firm, it’s important to evaluate the benefits of each model in light of your business goals for 2025. Your decision will largely depend on how you wish to manage relationships with your clients and candidates, and whether you prefer an end-to-end recruitment process or ongoing employee management.
Should I Choose A Recruitment Firm?
As a recruitment firm, you can attract a wide range of clients by offering a service that saves them significant time and money. This model is particularly advantageous for filling permanent, long-term roles where the quality and longevity of the candidate’s placement are paramount. Modern recruitment techniques now integrate digital tools and AI-fast screening methods – further ensuring that only the best candidates are selected. For additional insights, you might also consider reading our article on creative financing options for business growth.
It’s crucial that candidates possess the requisite skills and experience, as these roles are intended for long-term engagement. With your experience and the support of current technology, you are well placed to ensure that your clients receive top-tier candidates.
Furthermore, recruitment firms benefit from extensive industry knowledge, enabling them to make decisions that are both timely and informed. To explore more about how you can streamline your recruitment operations, visit our contract drafting guide.
What Documents Do I Need?
While recruitment firms do not manage employees after the client hires them, it is essential to have robust legal documentation in place. You should have a dedicated Recruitment Terms and Conditions package, which includes a Recruitment Agreement with your client (the employer) covering aspects such as:
- Liability clauses
- Commission fees
- Dispute resolution procedures
Additionally, a Candidate Agreement is vital to enable the secure sharing of candidate information with your clients. For a more detailed breakdown of the required documents, please refer to our recruitment business legals guide.
Should I Run A Labour Hire Firm?
If your business demands flexibility, operating as a labour hire firm may be preferable. This model is especially suited to clients with short-term projects, fluctuating staffing needs or unexpected vacancies.
A key advantage of a labour hire firm is that the employees are not only recruited and pre-trained to meet client needs but are also managed continuously by the firm – ensuring they are ready to be deployed at short notice. For further guidance on setting up such a structure, please review our Labour Hire Agreement resource.
Furthermore, the enduring client relationships fostered by labour hire firms can offer significant benefits. Continuous engagement with both clients and employees means you can tailor training programmes precisely, thereby enhancing the overall quality of your workforce and ensuring that your services remain in demand.
What Documents Do I Need?
Given the regulatory scrutiny in the labour hire sector in 2025, having comprehensive legal documents is imperative. You must establish a detailed Labour Hire Agreement that specifies the responsibilities and rights of your firm, your client and the employed candidates. This agreement should cover wages, liability, Work Health and Safety (WHS) obligations and additional contractual provisions.
Additionally, as you remain the employer, you must ensure full compliance with your employer obligations. Essential documents include:
- Employment Contracts
- Work Health and Safety guidelines
- Remote Work policies
- Employee Onboarding procedures
- Employers’ Liability information
- Leave Entitlements
- Confidentiality Agreements
- Policies and Staff Handbooks
Need Help?
If your business aligns with either a recruitment agency or a labour hire firm, it’s important to clearly define your model as the differences in operation can significantly impact your overall strategy. As we advance further into 2025, ensuring your business complies with the most current legal standards is essential. Consider your long-term goals and operational needs carefully before deciding on your business structure.
We understand that starting and running your own business can be challenging. Our team of expert lawyers at Sprintlaw is here to help you establish a solid legal foundation from the outset. Whether you need assistance drafting your contracts or advice on employment law, we’re just an email away. Contact us at [email protected] or call us on 08081347754 for an obligation-free chat.
Also, if you’re looking to stay updated with the latest legal and industry insights, be sure to explore our comprehensive guides covering everything from business set-up to employment law updates.
Future Trends in Talent Acquisition for 2025
Staying ahead of the curve is essential in the competitive world of recruitment and labour hire. In 2025, emerging technologies such as AI-driven candidate screening, virtual reality interviews and data analytics continue to revolutionise the hiring process. These innovations not only improve candidate matching but also provide valuable insights for making more strategic hiring decisions. For further details on integrating technology into your recruitment practices, explore our latest business set-up guides.
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