​​​​​​​The employment agency provisions in the Payroll Tax Act 2008​ (the Act) apply to a labour hire arrangement where a person (the employment agent) contracts with another (the client) for the provision of labour where there is no agreement between the service provider (contract worker) and the client.

Employment agencies that engage persons to provide services to their clients under an employment agency contract are liable to payroll tax. The tax is calculated on any amount paid to the contract worker from any source for that contract and the value of any fringe benefits and superannuation contributions provided. 

Section 38 of the Act deems an employment agent under an employment agency contract to be the employer, and the contract worker under an employment agency contract to be an employee of the employment agent.

These provisions apply regardless of whether the relationship between the contract worker and the employment agency is one of principal/contractor or employer/employee. Where the Employment Agency provisions apply the following amounts will not be taxable: 

• any amount paid in fees to the employment agency; 
  
• any amount paid for services provided to a client that was an exempt employer under the provisions of Part 4 of the Act (refer to Exempt Wages). In these situations, the exempt employer must provide the employment agent with a statement stating that they are exempt from payroll tax.

The relevant contractor provisions are not applicable where a contract worker is provided under an employment agency contract.​

​Exempt clients

An employment agency contract is a contract under which a person (employment agent) procures the services of another person (service provider) for a client of the employment agent. ​

This declaration is to be made by a client who is exempt​​​ under Part 4 of the Act.

• Employment agency contracts ​exemp​t ​​clients declaration

Chain of on-hire

A ‘chain of on-hire’ occurs when an employment agent on-hires a service provider to another employment agent who in turn on-hires the service provider to its client. 

This declaration is to be made by the employment agent who is the closest to the ultimate client who is the end user of the labour provided by the service provider.

• ​Employment agency contracts ​​chain of on-hire declaration ​​

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