Want to Hire a Labour Hire Worker Permanently? Here's How It Works

Your formworker has been on site for five months.

He shows up at 6am. Every day. Knows the pour schedule without asking. The crane crew trusts him. Your foreman stopped checking his work three months ago.

You don't want to lose him. You want to make him yours.

So you call the agency.

"What happens if I want to hire him permanently?"

That question opens a door most site managers don't think about until the worker is already indispensable. And the answer is not as complicated as most agencies make it seem — but it does involve money, timing, and a contract clause you probably didn't read when you signed up.

Here's how temp-to-perm conversion actually works in Australian labour hire. The fees, the timelines, the legal position, and when it genuinely makes sense to pull the trigger.

How Temp-to-Perm Conversion Works

Labour hire is designed as a flexible staffing model. You get workers fast. You scale up and down. You don't carry the recruitment risk.

But flexibility has a natural end point. When a worker proves they are exactly what you need — reliable, skilled, trusted by the crew — the conversation shifts. You stop thinking about them as a temp. You start thinking about retention.

That's where conversion comes in.

Temp-to-perm conversion means transitioning a labour hire worker from the agency's payroll to your direct employment. The agency stops billing you. The worker becomes your employee. You take on everything — wages, super, workers comp, leave entitlements, Fair Work obligations.

The process has three moving parts.

1. The conversation with your agency

You tell the agency you want to convert the worker to permanent. A good agency will not fight this. They expected it — good workers get absorbed. That is the natural lifecycle of labour hire.

What happens next depends on your agreement.

2. The conversion fee

Almost every labour hire contract includes a conversion clause. This specifies:

• Whether a fee applies
• How the fee is calculated
• Whether the fee reduces over time
• What notice period is required

The fee exists because the agency invested in finding, screening, onboarding, and managing that worker. When you take the worker off their books, they lose the ongoing revenue — and the return on their recruitment investment.

3. The employment transition

Once the fee is agreed, the worker transitions from casual employment with the agency to permanent (or fixed-term) employment with you. This means:

• New employment contract drafted by you
• Super, workers comp, and payroll tax transfer to your business
• The worker's leave entitlements reset (casual workers don't accrue leave — permanent employees do)
• Any relevant enterprise agreement at your site now applies directly

Understanding Conversion Fee Structures

The conversion fee is the part that stops most people. Not because it's unreasonable — but because nobody explained it upfront.

Here's how fees typically work across the Australian labour hire industry.

Percentage of Annual Salary

The most common model. The agency charges a one-off fee based on the worker's expected annual salary in the permanent role.

Industry range: 10–20% of annual salary.

For a general labourer earning ~$60,000–$65,000 per year (full-time permanent with leave entitlements), that's:

• At 10%: $6,000–$6,500
• At 15%: $9,000–$9,750
• At 20%: $12,000–$13,000

For skilled or licensed roles on higher salaries, the dollar amount increases — but the percentage stays the same.

The percentage varies by:

• How long the worker has been on assignment — longer assignments = lower fee
• The skill level of the worker — specialist trades attract higher fees
• Volume of workers you have with the agency — large clients often negotiate better terms
• What the original agreement says — this is a commercial negotiation, not a fixed number

Hours-Based Sliding Scale

Many agencies use a sliding scale tied to hours worked on assignment. The logic: the longer a worker has been generating revenue for the agency, the more of the recruitment investment has been recovered.

A typical structure looks like this:

The numbers above are illustrative — every agency has its own schedule. The principle is universal: time on assignment reduces the fee.

At 40 hours per week, 800 hours is 20 weeks — roughly 5 months. Most agencies consider 5–6 months of continuous assignment as the point where their recruitment investment has been fully recovered through the margin earned on the hourly rate.

Flat Fee

Some agencies — particularly for lower-skilled roles — charge a flat conversion fee regardless of salary. This might be $1,500–$5,000 per worker depending on the role complexity.

Flat fees are simpler but less common in construction and warehouse labour hire. They're more typical in office temp or retail staffing.

No Fee After a Qualifying Period

Some agencies waive the fee entirely after a specified period — typically 3–6 months (or 500–800 hours). The agreement might read:

"After 800 hours of continuous engagement, the Client may offer direct employment to the Worker with no conversion fee payable."

This is the cleanest arrangement. You get an extended trial period. The agency earns their margin during that time. After the threshold, the worker is free to transition.

What's in a Conversion Agreement

Before you sign anything, understand what the conversion clause in your labour hire agreement actually says. Most people skim past it during onboarding. It matters when you want to keep a good worker.

Notice period

Most agreements require 2–4 weeks written notice to the agency before converting a worker. This gives the agency time to adjust their workforce planning and, in some cases, negotiate the fee.

Trying to convert a worker without notice — or hiring them "off the books" after the assignment ends — typically triggers the full fee automatically, plus potential legal action.

Cooling-off period

Some contracts include a cooling-off period — typically 3–6 months after the assignment ends — during which you cannot hire the worker directly without paying the fee. This prevents the obvious workaround: ending the assignment on Friday and hiring the worker on Monday.

If you're thinking about that approach — don't. Agencies track this. Courts enforce reasonable restraint clauses.

Exclusivity clauses

In some agreements, the conversion clause is tied to exclusivity — meaning if the agency introduced you to the worker, the fee applies regardless of how long ago the assignment ended.

Check whether the clause has a time limit. An indefinite restraint is unlikely to be enforceable under Australian contract law, but a 6–12 month restraint is generally considered reasonable.

Fee calculation method

The agreement should specify exactly how the fee is calculated:

• What salary figure is used (base salary, total package, or estimated annual earnings at the bill rate)?
• Does it include super?
• Is the percentage fixed or sliding?
• Is there a cap?

If it's unclear — ask. Before you need to. Not when you've already found the worker you want to keep.

When Conversion Makes Sense — and When It Doesn't

Not every good worker should be converted to permanent. The decision is commercial, not emotional.

Convert When:

The role is genuinely ongoing. If the position will exist for 12+ months with stable hours, permanent employment is almost always cheaper per hour than labour hire. The cost breakdown of labour hire rates shows the margin you're paying on every hour — that margin disappears when the worker is on your payroll.

The worker has proven themselves. Five months of reliable attendance, good work quality, and crew integration is better due diligence than any interview process. You've had a 1,000-hour trial. That's worth paying a conversion fee for.

You have the infrastructure. Permanent employees need payroll runs, super contributions, workers comp policy coverage, leave tracking, and Fair Work record-keeping. If you have an HR function or a payroll provider, this is manageable. If you're running a 5-person operation from a ute — think carefully.

The conversion fee is reasonable relative to recruitment cost. Recruiting a general labourer yourself costs $500–$1,500 between job ads, screening, and induction. For skilled or licensed roles, it's higher — $2,000–$4,000. A conversion fee for a worker you've already tested on site for months eliminates the recruitment gamble entirely. You're paying for certainty.

Keep on Labour Hire When:

The role is project-based. If the project ends in 3–6 months, converting the worker creates a redundancy obligation. Labour hire gives you flexibility to scale down without the legal and financial complexity of termination.

You haven't hit the fee waiver threshold. If the conversion fee is $12,000 at month 2 but $0 at month 5 — wait. Three more months of margin payments will cost less than the fee. Run the numbers.

Demand is unpredictable. Construction sites ramp up and down. If you might need 15 labourers this month and 8 next month, keeping workers on labour hire lets you flex without managing layoffs.

The worker hasn't been tested enough. A worker who's been on site for 3 weeks is not a proven hire. That's a first impression. Keep them on labour hire, evaluate for 3–6 months, and convert when you're confident.

What Happens When You Try to Poach a Worker

Let's address the elephant on site.

Some clients think they can skip the agency and hire the worker directly. Maybe the assignment ends on Friday and they offer the worker a start on Monday. Maybe they slip the worker a number and say "call me when your contract's up." Maybe they just stop booking through the agency and put the worker on their own payroll.

This is poaching. And it almost always ends badly.

Here's what typically happens:

The agency finds out. Workers talk. Payroll records change. The agency notices when a worker stops getting shifts but is still on the same site. It's not subtle.

The contract kicks in. Your labour hire agreement has a conversion clause and a restraint of trade provision. By hiring the worker without following the process, you've breached the agreement. The agency is now entitled to the full conversion fee — and potentially damages.

You get a letter from their lawyers. The agency will demand the conversion fee plus legal costs. If you refuse, they'll pursue it. Courts in Australia enforce reasonable restraint clauses. A 6–12 month restraint with a conversion fee schedule? Enforceable. You'll pay the fee anyway — plus their legal costs on top.

You lose the relationship. The agency will stop supplying workers to your site. Now you need a new supplier — and in a tight market, that's not instant.

Other Legal Considerations

Beyond the poaching risk, there are legal dimensions worth understanding — the casual conversion provisions of the Fair Work Act, and your obligations as the new employer.

Fair Work Casual Conversion Rights

Under the Fair Work Act 2009 (as amended), casual employees — including labour hire workers — have a right to request conversion to permanent employment after 12 months of regular and systematic employment with their employer. The Fair Work Commission oversees disputes arising from casual conversion requests.

The key word is "their employer" — which is the agency, not you.

If a labour hire worker exercises their casual conversion right, they become a permanent employee of the agency. They do not automatically become your employee. A separate commercial agreement between you and the agency is required to transfer the employment relationship.

This is a common point of confusion. The Fair Work casual conversion provisions do not override or replace your conversion clause with the agency.

Your Obligations as the New Employer

Once you convert a labour hire worker to permanent employment, you take on full employer obligations under the Fair Work Act 2009 and applicable Modern Awards or enterprise agreements:

One critical point: when the worker transitions from casual with the agency to permanent with you, their leave entitlements start fresh. Prior casual service with the agency does not count toward your leave accrual — unless a specific arrangement is negotiated.

However, for unfair dismissal purposes, the Fair Work Commission may consider the total period of engagement (including time on assignment through the agency) when assessing the minimum employment period. This is a nuanced area — take advice if it matters.

The Real Maths — Is Conversion Worth It?

Let's run the numbers on a real scenario.

The worker: A CW3 trade assistant who's been on your Parramatta site for 6 months through a labour hire agency. Reliable. Productive. Trusted.

Current cost on labour hire:

• Bill rate: $55/hr
• 40 hours/week = $2,200/week
• Annual equivalent: $114,400

Cost if you convert to permanent (full-time):

• Award rate (CW3, permanent full-time): ~$30/hr base
• Plus 11.5% super: $3.45/hr
• Plus workers comp (~5%): $1.50/hr
• Plus payroll tax (5.45%): $1.64/hr
• Total employment cost: ~$36.59/hr
• 38 hours/week = $1,390/week
• Annual equivalent: $72,310

The difference: $42,090 per year in reduced costs — but now you carry leave obligations, redundancy risk, and admin.

Conversion fee at 10%: ~$7,200 (based on $72K annual salary)

Break-even: The conversion fee is recovered in roughly 9 weeks of reduced hourly cost.

The numbers are clear. If the role is ongoing and the worker is proven — conversion is almost always the better commercial decision.

But remember: the hourly saving comes with new obligations. Leave accrual, redundancy, unfair dismissal protections, payroll admin. Those are real costs. They just don't show up on a per-hour comparison.

How to Handle the Conversation With Your Agency

The best conversions happen when both sides treat it as a planned transition, not a fight.

Step 1: Review your agreement first. Know what the conversion clause says before you call. Understand the fee structure, notice period, and any cooling-off provisions.

Step 2: Notify the agency in writing. A phone call is fine to start the conversation. Follow up with a written notice as required by the agreement. Be specific — name the worker, the proposed start date of permanent employment, and reference the conversion clause.

Step 3: Negotiate the fee if applicable. If the worker has been on assignment for a significant period, the fee should reflect that. Most agencies are reasonable here — they'd rather collect a reduced fee and maintain the client relationship than fight over the full amount and lose you entirely.

Step 4: Agree on a transition date. Give the agency reasonable notice — typically 2–4 weeks. This allows them to close out the worker's payroll, finalise any outstanding timesheets, and manage their workforce planning.

Step 5: Onboard the worker as your employee. Draft the employment contract. Set up payroll. Add them to your workers comp policy. Conduct a formal induction as a permanent employee — even if they've been on your site for months.

How LEAP Approaches Conversion

We place construction and warehouse workers across Greater Sydney. Some of them stay on labour hire for years. Some are converted to permanent within months. Both outcomes are fine — because we build the conversion pathway into the relationship from day one.

We don't publish our exact fee schedule here — it depends on the role, duration, and your specific arrangement. But we'll tell you exactly what it is before you sign anything.

No surprises in the contract. The conversion clause is explained during onboarding — not hidden on page 14. You know the ballpark fee, the sliding scale, and the waiver threshold before a single worker sets foot on your site.

No unreasonable lock-in. We use an hours-based sliding scale. The longer a worker is on assignment, the lower the fee. After the agreed threshold, the fee reduces significantly or is waived. We don't trap clients into labour hire arrangements they've outgrown.

We help with the transition. When a client converts a worker, we provide the worker's credential records, training history, and site performance notes to help with onboarding. The worker's history shouldn't disappear when the payroll changes.

We keep the relationship. A client who converts one great worker still needs 10 more next month. We'd rather lose one bill rate and keep the partnership than fight over a fee and lose the account.

Want to know the exact numbers? Check our rates — we'll send you the full labour hire agreement where the conversion terms are clearly defined. No guesswork.

For a full picture of what you're paying on every labour hire hour — and why that context matters for the conversion decision — see our complete labour hire cost breakdown. Understanding what your obligations are as a host employer is also worth reading before you make the permanent hire — because some of those obligations change when the worker becomes your direct employee.

A good labour hire agency sees conversion as a graduation, not a loss.

Frequently Asked Questions

Ready to Talk Conversion?

If you're running a site in Greater Sydney and you've got a labour hire worker you want to keep — or you want to understand the conversion pathway before you start — get in touch with Leap Labour.

We'll walk you through the fee structure, the timeline, and what the transition looks like. No surprises. No hidden clauses.

And if the answer is "keep them on labour hire for now" — we'll tell you that too.

The goal is the right worker in the right arrangement. Not every arrangement needs to be permanent — but when it does, the path should be clear.