Labour Agreements

Important information on sponsorship obligations for Labour Agreement holders

A Labour Agreement (LA) is a formal contract entered into between the Commonwealth and an Australia business under where the business is authorised to recruit overseas workers, within specified terms and conditions. The Labour Agreement framework is designed to provide a flexible solution to support Australian businesses where standard temporary or permanent skilled visa programs are not available, and the employer’s recruitment needs cannot be met through the Australian labour market.

It is common practice across many industries to utilise labour hire or recruitment companies to source overseas workers. Such companies may be based in Australia or overseas.  While the use of these companies can be an efficient and cost effective method to source workers, there have been recent instances of disreputable companies exploiting and unfairly profiting from overseas workers. In April 2021, the Australian Border Force announced the successful prosecution and sentencing of a labour hire organiser facilitating illegal work.

Requirements of a Labour Agreement

Although there are different types of labour agreements, there are some common clauses built into all agreements that are relevant to the use of labour hire companies and business obligations.  It is important that Australian businesses who are already party to, or seeking to enter into, a Labour Agreement are aware of these requirements and obligations.

Key points on obligations include:

  • Sponsorship obligations for Labour Agreement holders largely mirror those of standard business sponsors but can be varied or added to under the terms of the Agreement. These obligations cannot be out-sourced to third parties.
  • Labour hire or recruitment companies must be licenced in accordance with relevant state or territory legislation. Information on licencing requirements can be found on the Fair Work Ombudsman’s website.
  • Overseas workers must be directly employed by and paid by the business.
  • Businesses must not nominate an overseas worker to fill a position where it reasonably suspects, or ought to reasonably suspect, the worker owes money as a result of being recruited. Conversely, businesses must not recover any recruitment costs it may have incurred from sponsoring the worker.
  • Businesses must take all reasonable steps to ensure they recruit overseas workers with the skills and experience necessary to perform the occupations covered in the agreement. The Department carefully assesses all visa applicants to verify claimed skills and experience – where serious and repeat visa-related fraud is detected this could lead to suspension or termination of the nominating business’s Labour Agreement.
  • Contractual arrangements between labour hire companies and the business must not undermine the terms of the Labour Agreement.

Information to provide the Department regarding use of labour hire companies

The Department may request information from businesses to be satisfied that arrangements with labour hire companies are appropriate and do not compromise the business’s ability to meet its legal obligations. The general expectation is that businesses will be able to demonstrate they have conducted due diligence when engaging labour hire companies including:

  • having an understanding of the business practices the company uses to source and vet workers; and
  • being aware of any sub-contracting arrangements and that the company is licensed (where required).

Businesses should also demonstrate that they have good governance processes in place to manage these arrangements on an ongoing basis, such as risk or assurance plans to safeguard against possible non-compliance, and to act on any risks or problems identified.

Useful information in relation to managing labour contractors can be found at the Fair Work Ombudsman’s website

Change to ‘reliance on overseas workers’ assessment criterion

An organisation’s potential over-reliance on overseas workers is one factor considered when assessing requests from organisations for a labour agreement. Previously, all requests where overseas workers comprised 30% or more of an organisation’s total workforce were subject to additional scrutiny before the request was decided.  There are new policy settings, already in-effect, for this criterion as shown in the table below:

 Category 1Category 2Category 3
AreaMajor Cities of Sydney, Melbourne and BrisbaneCities and Major Regional Centres of Perth, Adelaide, the Gold Coast, the Sunshine Coast, Canberra, Newcastle/Lake Macquarie, Wollongong/Illawarra, Geelong and HobartRegional Centres and Other Regional Areas
Reliance on Overseas WorkersIn any one year period, overseas workers do not comprise more than 30% of their workforce with flexibility according to circumstances of business such as small/medium businesses and industryIn any one year period, overseas workers do not comprise more than 50% of their workforce with flexibility according to circumstances of business such as small/medium businesses and industryNot assessed

Note the percentages remain an indicator only for delegated decision-makers to look more deeply at the organisation’s circumstances and there is still policy flexibility to approve labour agreement requests from organisations that have unique workforce profiles.

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