In shortLabour hire suits genuinely short-term, variable or trial needs. For any role you expect to need for more than 12–18 months, permanent employment is almost always cheaper over time, gives you more control, and holds people better. Many businesses use labour hire well past the point where converting to permanent would have paid off.
Labour hire is a useful tool. It covers a spike in work, a parental-leave gap, a project with a hard end date, or a “try before you commit” situation. Used for those things, it earns its margin.
The problem is drift. A labour hire worker starts for three months, is good, and is still there two years later — on a charge rate that has quietly cost the business 30–60% more than employing them would have, with none of the loyalty that comes from being on the team.
The comparison
| Permanent employment | Labour hire | |
|---|---|---|
| Cost over 2+ years | Lower | Higher (charge rate includes margin, on-costs, agency risk loading) |
| Speed to start | Slower (notice periods, proper search) | Faster |
| Flexibility to scale down | Lower (redundancy process) | Higher (end the assignment) |
| Control and integration | High — your systems, your culture, your IP | Lower — worker is employed by the agency |
| Retention | Higher — people stay where they belong | Lower — easy to move to the next assignment |
| Admin and compliance burden | On you (payroll, entitlements, WHS) | Largely on the agency |
| Best for | Ongoing roles, core team, anything >12–18 months | Short-term, variable, trial, hard-deadline projects |
A simple test
Ask one question: do I expect to need this role in 18 months?
- Yes, clearly — hire permanent. Every month on a charge rate past that point is money you do not get back, and the person is more likely to leave.
- No, it genuinely ends — labour hire or a fixed-term contract is the right call.
- Not sure — this is the real “try before you commit” case. Use labour hire with a clear conversion plan and a date to decide, so it does not drift.
Converting labour hire to permanent
If you have people on labour hire who should be on the team, converting them is usually straightforward and worth doing. Budget for a conversion fee if they came through an agency, run a proper offer conversation (they may have got comfortable on a high charge rate that does not translate directly to a base salary), and be clear about what changes — leave, super, notice, and being genuinely part of the business.
Some people on labour hire actively prefer it and will not convert. That is fine — but you should know which of your long-term contractors those are, and which are just waiting to be asked.
Related: the real cost of a bad hire, and, for candidates weighing it up, moving from contract to permanent.