Background

The NSW Labor Government has recently announced that, if re-elected, it will legislate within 100 days to establish a statewide labour hire licensing scheme. This proposal coincides with Victorian reforms to tighten regulations governing its own labour licensing scheme.

The proposed NSW scheme will require labour hire providers in all industries to hold a licence, and penalties will apply for non-compliance, including for host organisations that engage unlicensed labour hire providers. The NSW Government has said the scheme will align with – yet to be agreed - national principles on Labour Hire Licensing, businesses will receive appropriate education surrounding compliance, and unions, industries and workers will be consulted during the development process.

Why now?

The NSW Government proposal follows an independent probity investigation by Max Kimber SC into labour hire practices on the Western Sydney Airport Metro project ('the Kimber Report') which ultimately resulted in the termination of a major subcontractor. Amongst other things, the Kimber Report found suspected underpayment of workers by labour supply companies which the principal contractor did not know were engaged.

The Kimber Report found suspected underpayment of workers, insurance and tax fraud, and unaccounted invoices worth more than $10 million. The investigation detailed a complex subcontracting chain of undisclosed downstream labour, labour supply companies being incorporated within days of each other at the same residential address with the same director and secretary, and invoices being exchanged via a self-deleting application.

The findings of the Kimber Report reinforce concerns around the lack of regulation of labour hire in NSW. Unions NSW, the McKell Institute, the NSW Parliament's Modern Slavery Committee and NSW Anti-slavery Commissioner and others have called on the NSW Government to establish a labour hire licensing regime to address exploitation of labour hire workers, particularly in the horticulture sector.

The McKell Institute and others have also argued that unscrupulous labour hire providers should not be able to relocate their business to NSW when their licence is refused or cancelled elsewhere. The Institute identified 63 operators whose licences had been cancelled in Queensland or Victoria but that were still trading in NSW. It says this is likely an undercount.

What can we expect from the NSW proposal?

Currently, Australia has a patchwork of labour hire licensing regimes at state and territory level (in Queensland, Victoria, South Australia and the ACT). The regimes are not consistent, and different penalties apply.

The New South Wales Government has said it intends to design a scheme that is the "best in the country". It has not yet provided a draft bill. The NSW Anti-slavery Commissioner has however produced a draft Labour Hire Licensing Bill 2026.

The McKell Institute and the NSW Anti-Slavery Commissioner recommend combining features of the existing Queensland and Victoria models – some of these features include:

• Queensland's upfront licensing system (Labour Hire Licensing Act 2017 (Qld)) – in Queensland, a licence will only be granted where the applicant and relevant persons pass a broad fit and proper person test, and the business is found to be financially viable. In Queensland, licences run for one year.
• Victoria's dedicated regulator and full cost-recovery model (Labour Hire Licensing Act 2018 (Vic)) – the Victorian Labour Hire Authority is a standalone, fee-funded regulator. Licences run for up to three years and fees are based on business size (in 2026-27, annual licence fees range from about $1,300 for businesses with turnover up to $2 million to about $6,400 for those with turnover above $10 million).

Recent changes in Victoria

Victoria's labour hire licensing scheme commenced in 2019. Recent amendments to Victoria's Labour Hire Licensing Act 2018 took effect on 1 October 2026 (see the Labour Hire Authority's announcement), following earlier changes in mid-2026 that introduced a financial viability requirement and a more rigorous fit and proper person test.

The definition of labour hire in Victoria has been amended to focus on whether an arrangement has the character of labour supply – including 'bare intermediary' companies that on-supply workers employed by others – and will require a licence to supply labour hire anywhere in a supply chain.

For commercial cleaning, a new definition of 'commercial premises' (including the cleaning of accommodation, construction sites, office buildings and schools) codifies existing coverage, so cleaning providers continue to need a licence. Regulations expected later in October are also anticipated to extend the scheme to certain construction roles (traffic management, site security, concreting and crane operating) on Victorian Government-funded projects with a total cost over $50 million. Clients with Victorian operations should review multi-tier labour supply and subcontracting arrangements, and commercial cleaning providers should confirm they hold a licence.

Key considerations for organisations

1. Host organisations carry direct legal exposure – under the proposed NSW scheme, host employers will face penalties for engaging an unlicensed provider, as they do in Queensland, Victoria, South Australia and the ACT. For this reason, host organisations will need to undertake appropriate due diligence, including by incorporating onboarding and periodic licence checks.

2. Strengthen supply chain visibility – the definition of 'labour hire services' is expected to be broad – as it is in other jurisdictions – and capture different forms of business relationships, including subcontracts, and potentially other placements, based on the form NSW's legislation takes. Organisations should ensure they understand their contractual chains and are able, among other things, to track who is on site, and the work people are performing, including in complex contractual chains, as the Kimber Report illustrates.

3. Review supply and service contracts – Supply and service contracts should be carefully reviewed to ensure they are appropriately drafted.

4. Notification obligation – watch this space – It remains to be seen whether the NSW Government will implement a requirement (proposed in the NSW Anti-slavery Commissioner's draft Bill) for host organisations to proactively notify the regulator of suspected serious exploitation, modern slavery, unlawful recruitment fees or serious underpayments. Interstate schemes currently are not as onerous as proposed by the NSW Anti-slavery Commissioner.

5. Cross-jurisdictional reference – organisations are encouraged to proactively audit providers in NSW against interstate licensing standards. The providers' prospects of holding licences in NSW may be low if they do not currently satisfy interstate requirements, or have a history of cancellation or refusal elsewhere.

6. Expect regulators to share information – labour hire risks do not exist in a vacuum, and a single compliance failure can draw scrutiny from several regulators. Our experience in Queensland reveals, for example, the willingness of the Labour Hire Licensing Compliance Unit to work closely with other regulators (eg underpayment issues identified by the Fair Work Ombudsman may become known to the Compliance Unit and may affect a provider's licence; arrangements may also lead to scrutiny from work health and safety regulators).

Our teams have worked with a number of clients to help them understand and comply with labour hire licensing regimes across the country. We are monitoring developments closely. If you have any questions about the NSW proposal, or labour hire regulation more generally, please do not hesitate to contact us.