The true cost of labour hire under an EBA is the pay rate set by the right instrument, plus the loadings your roster triggers, plus the oncosts the provider carries, plus margin and service fees. Each of those lines can be written down before you accept a quote, and that is the only reliable way to compare one charge rate against another.
This guide gives Melbourne and Victorian hosts a step method with blanks to fill in, not finished numbers, because rates change whenever an award or agreement is varied. For a general hourly budget, our post on labour cost per hour covers the basics. This guide goes further into how an enterprise agreement changes the build.
Start from the right pay instrument
Every labour hire cost starts with the instrument that sets the worker's pay. Fair Work says labour hire employers hire their employees and are responsible for providing them with their pay and entitlements. That makes the first question which award or agreement covers the provider's employee, not which one covers your own staff.
The Fair Work Ombudsman notes that some employers and employees are covered by an enterprise agreement and not an award. If your provider pays under an award, the base rate comes from that award. The Fair Work pay calculator covers award minimum rates, allowances and penalty rates.
Your own agreement enters the calculation in one situation: when a regulated labour hire arrangement order applies to your site. Employees, unions and hosts can apply to the Fair Work Commission for an order. When one applies, labour hire employees working for that host must be paid no less than they would receive under the host's workplace instrument, such as an enterprise agreement. Fair Work calls this the protected pay rate.
Without an order, do not assume your agreement rates flow through to the invoice. Ask the provider which instrument it pays under and get the answer in writing. Where an order applies, the provider must check pay under both its own instrument and the protected rate, and pay the higher amount. Carry both columns in your model until you know which is higher.
Add roster-driven loadings
Once the instrument is settled, the roster decides what gets added to the base rate. Fair Work describes a protected pay rate as the minimum wage under the instrument plus any additional amounts that follow from the employee's hours and working conditions. That list works as a checklist for any labour hire quote.
- Penalty rates. Which hours fall on nights, weekends or public holidays, and what the instrument pays for them.
- Overtime. How many hours beyond the ordinary week a normal roster holds, and where overtime starts.
- Loadings and allowances. Any loading or allowance the instrument attaches to the role, task or site conditions.
- Incentives. Bonuses or incentive-based payments, if the instrument provides for them.
- Casual rates. Fair Work says casual labour hire employees receive the casual rate in the host's instrument where it has one, and a different method applies where it does not.
Write the roster first, then price it. Ten-hour days across six days cost differently from eight-hour days across five, even at the same base rate. Agree in writing how roster changes are priced. Our notes on host contract clauses cover the contract side.
List oncost lines the provider funds
Oncosts are the employer costs added to wages. The provider is the employer, so the provider funds them, and the charge rate has to recover them. Oncosts for labour hire are where quotes differ most, so ask for each line to be named, even if the amounts stay private.
- Superannuation. Check the current Super guarantee rate with the ATO rather than trusting a figure in a quote.
- Workers compensation. Ask how the provider's insurance cost is built into the rate.
- Leave and other costs. Ask which entitlements apply to the worker's type of employment, and whether any state tax sits in the rate.
Do not assume these lines sit inside or outside a protected pay rate. Fair Work lists superannuation and workers compensation among payments excluded from the protected pay rate for certain employer types, including sole traders and partnerships in Victoria. Ask, and record the answer.
Fair Work's guidance on labour hire and supply chains describes a manufacturer that pays a low contract price, suspects it cannot cover overtime and penalties, and says nothing. Fair Work says that business may be involved in any underpayment and could face court action. A line-by-line model lets you ask before signing.
Margin and non-wage fees
After wages and oncosts, the remaining lines are the provider's margin and any service fees. Fees can cover items such as inductions, equipment, transport or minimum shift lengths. Ask for each to be stated, rather than buried in one hourly figure.
Chandler Personnel runs site inductions on behalf of clients, so if you want inductions handled for you, ask every provider whether that sits in the rate or is billed separately.
Do not guess margin from a percentage found online. A margin that looks high may cover costs nobody itemised, and one that looks low may hide a gap in the oncosts. A separate guide in this series compares quotes from several agencies: line the quotes up, and the gap usually traces to one line.
Worked structure you can reuse on the next quote
Copy this structure into a spreadsheet and fill each bracket from a source you can name. Leave a bracket empty rather than guess. There is no official EBA labour hire cost calculator that produces a charge rate for you, so this sheet is the calculator.
- Line 1, instrument. [Award or agreement name] and [classification level], confirmed by the provider in writing.
- Line 2, base rate. [Hourly rate from the instrument or the Fair Work pay calculator] and [date checked].
- Line 3, roster loadings. [Hours at ordinary time], [hours at overtime] and [hours at penalty rates], each priced from the instrument.
- Line 4, allowances and incentives. [Each item and how often it applies].
- Line 5, casual rate or leave. [Whichever applies to the type of employment].
- Line 6, oncosts. [Superannuation], [workers compensation] and [other lines], as the provider states them.
- Line 7, margin and service fees. [Stated by the provider as separate items].
- Line 8, result. [Total weekly cost] and [cost per productive hour].
If an order applies, run Lines 1 to 5 twice, once under the provider's instrument and once under the host's agreement, then carry the higher result forward. Fair Work also says the protected pay rate need not be paid to employees on a training arrangement or engaged short term, usually three months or less.
Date the sheet and rebuild it whenever an instrument is varied. If the same role stays on your roster for months, price it as a permanent hire too. Chandler Recruitment handles permanent recruitment in Melbourne, and plants hiring on-hire crews can see the roles covered under manufacturing labour hire.
Related Resources
- Labour hire in Melbourne
- Labour cost per hour
- Host contract clauses for the first shift
- Manufacturing labour hire
- Fair Work enterprise agreements
- Protected pay rates for labour hire employees
- Fair Work pay calculator
Common Questions About the True Cost of Labour Hire
1. What is the true cost of labour hire under an EBA?
It is the full amount you pay for a worker once you count the pay set by the right instrument, the loadings your roster triggers, the oncosts the provider funds, and the provider's margin and fees. Your agreement sets the pay rate only where a regulated labour hire arrangement order applies.
2. Does the charge rate equal the worker take-home rate?
No. The charge rate covers the worker's wages before tax, plus oncosts, margin and any fees. Take-home pay is what the worker receives after tax. The gap between the two is where oncosts and margin sit.
3. How do I include overtime in a labour hire cost model?
Estimate the overtime hours a normal roster will hold, then price them using the overtime terms in the instrument that applies to the worker. Fair Work lists overtime among the amounts counted in a protected pay rate. Keep overtime on its own line.
4. Where do Super and workers compensation sit?
They are oncosts the provider carries as the employer, and the charge rate has to recover them. Ask the provider to name each line, and check the current Super guarantee rate with the ATO. Some Victorian employer types have these payments excluded from the protected pay rate, so confirm how your provider treats them.
5. Can I use a single multiplier for every role?
It is risky. Roles sit at different classification levels, rosters trigger different loadings, and casual and ongoing workers carry different costs. One multiplier hides all of that. Build each role from its own instrument and roster.
Build the Cost From the Instrument Up
A labour hire quote is only as clear as the lines behind it. Work through the instrument, the roster, the oncosts and the fees in that order, and ask every provider to answer the same questions. When your sheet is filled in, request staff with the roster and classification detail ready. For the wider picture, see labour hire in Melbourne.
