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From a distance, labour hire firms and recruitment firms might seem quite similar in what they do, but take a step closer and you will notice significant differences. Although they’re both in the same line of business – that of sourcing and providing workers – each has their own distinct way of going about it.

Both labour solutions providers aim to make the long, odious, and often expensive process of hiring workers simple and effective. And by understanding how each works, you can be able to choose the best firm for your specific staffing needs.

In this post, we shall be differentiating between the two types of labour companies to help you pick the best option for your specific circumstances.

What is a recruitment company?

A recruitment company plays the role of a matchmaker; helping organisations who are looking for workers find candidates with the skills and qualifications they need. These firms take over the HR function and ensure that the candidates they provide possess the skills, experience and qualifications required to fill a certain position in the client’s organisation.

Once the recommended candidate has been hired by the client company, the client will take on all the responsibilities of an employer and will pay their new employees’ wages, entitlements as well as manage them.

How Do Recruitment Firms Work?

Although each recruitment company has its own method of doing things, all of them generally follow a similar script.

  • A client comes to them with a detailed description of a position they would like to fill.
  • The agency looks in their database for candidates who meet the set criteria and draws up a shortlist. External sourcing (or headhunting) might be necessary if the skillset is not available in their current database.
  • Candidates who best match the set criteria are forwarded to the client for further vetting and the final selection.

Once the final candidate is hired, they become a “full” employee of the client company with no links to the recruitment company. The recruitment agency then gets a “finder’s fee” for their troubles, and the relationship with the client for that particular hire is concluded.

What is a labour-hire firm?

In a nutshell, a labour hire company is an organisation that provides permanent or temporary workers to businesses under a labour hire arrangement. These firms provide outsourced skilled and unskilled workers (mostly for blue collar jobs) for both short-term and long-term positions.

How labour hire firms work

Labour hire firms source, vet and then add candidates who are searching for work in their databases. When a client approaches them looking to fill a certain position, all that they need to do is look through their database for a match and send the candidate who matches the criteria to the client.

Although the candidate provided to you (the client) will be working in your organisation the same way your regular employees do, they will not really be your employee. That is because even though they are working for you, they still remain an employee of the labour-hire firm with you only hiring them from the firm for as long as you need them.

As such, all employer obligations such as remuneration, insurance, benefits and payroll maintenance fall under the purview of the labour-hire firm that provided the worker to you. And because the on-hired staff is not really your employee, payments are made to the labour-hire firm which then pays the worker instead of you paying the worker directly.

The provided worker will continue to have a direct relationship with the labour hire company as they are directly employed by them. This kind of arrangement enables you to have the extra workers you need without adding more people to your payroll.

So which one do you use?

The labour provision solution you chose depends on your needs. If you hire temporary employees often or would like to test out a role or candidate before committing to hiring permanently, then labour hire is your choice. For one-off permanent employee recruitments, however, using a recruitment firm would be the better option. 

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