2018 was quite a year for legislators seeking to license staffing and recruitment agencies. From Canada to Australia, lawmakers made moves to regulate the staffing sector. But does licensing work? There is no clear answer to that question as examples from several countries show.

Replacing a cumbersome regime: India

The Indian labor ministry has proposed amendments to the Contract Labour Regulation and Abolition Act, to introduce a mandatory national licensing scheme for all staffing firms, regardless of size. The new framework is set out in the draft Code on Occupational Safety Health and Working Conditions which, amalgamates 13 existing laws.

This is broadly welcomed by the staffing sector and users of contract labor because at present there is a cumbersome system for the procurement of contract labor. Currently, contract staffing companies have to procure a license for each and every job where they provide labor to a principal employer.

This is a tedious and time-consuming process, which has contributed to the majority of the staffing market being in the unorganized sector, depriving workers of social security benefits and employment rights. Out of 480 million workers in the country, just 10% are in the organized sector, so there are opportunities for staffing firms to improve the quality of work for a vast number of workers.

Cost-benefit analysis: UK

Licensing of temporary employment businesses and recruitment agencies existed in the UK from 1973 until 1995. The Employment Agencies Act 1973 introduced a scheme where all recruitment businesses were required to apply for a license by paying a fee and demonstrating compliance with certain other rules, such as not charging jobseekers for their work-finding services. The act followed similar regimes in other European countries, such as the German Arbeitnehmerüberlassungsgesetz of 1972.

However, whereas licensing continued across Europe, the Conservative government in the UK embarked on a drive to deregulate sectors where the cost and effort of administration outweighed the benefits of issuing licenses. The view at the time was that the system penalized those businesses that were diligent in complying with the law and did nothing to deter the rogue traders. The system was abolished by the Deregulation and Contracting Out Act 1994, relying instead on self-regulation by sector bodies and enforcement of regulations by the government body, the Employment Agency Standards Inspectorate.

That is not the end of the story. Following a tragic incident in 2004, when 23 Chinese migrant workers drowned while picking cockles on a beach in England, a form of licensing was revived for so-called “gangmasters.” Arguably, the Gangmasters Licensing Act, passed in 2006 with a remit limited to the agriculture, fishing and packaging industries, has done relatively little to crack down on worker abuses, with just 96 offenders prosecuted for failing to have a license or related offenses over 10 years.

Opposing views: Australia

Labor market abuses in Australia led two states, Queensland and Victoria, to introduce licensing schemes within the last year. However, South Australia’s labor government’s scheme, introduced in March, was repealed by the incoming liberal party by the end of the year. This reversal could be seen as a win for the staffing industry as the main trade bodies for the staffing, or labor hire, industry had lobbied hard to oppose licensing.

The Recruitment, Consulting and Staffing Association Australia & New Zealand argued for self-regulation of the on-hire worker services sector, via a voluntary code of practice. APSCo Australia argued against an all-encompassing licensing scheme across every sector of labor hire when the majority of professional staffing and contracting companies in the sector were compliant; and another layer of regulation increases both administration and costs.

Limited scope: Canada

Also in the past few months, both British Columbia and Quebec have passed laws that introduce a licensing scheme for staffing firms placing foreign temporary workers. Migrant workers are likely to be more vulnerable than indigenous workers and open to exploitation, so these schemes provide an assurance to those people coming to work in Canada.

“Workers coming to BC want to feel safe, confident their rights are protected, and that abusive employers will be held accountable,” said Harry Bains, Minister of Labour.


It seems that opinion is divided as to the effectiveness of a licensing scheme but that may depend on the reasons why it is introduced. Where the scheme improves the experience of employers and protects workers, there are obvious benefits, but licensing may be open to criticism if it fails to tackle the underlying abuses in the labor market caused by those who are determined to flout the law.