Employers in the scandal-plagued labour hire industry will face new rules banning anyone with criminal convictions, previous workplace breaches or links to collapsed businesses from operating in Victoria.

A sweeping inquiry into the unregulated labour hire market has found a licensing system is crucial to stopping the abuse of vulnerable workers, particularly in low-paid sectors such as horticulture and contract cleaning.

Casual boilermaker Harry Marshall was often hired out to unfamiliar factories and workshops Credit:Justin McManus

The Andrews government on Thursday said it was alarmed at widespread exploitation at the hands of rogue labour hire operators, and committed to setting up a state-based licensing scheme.

Victoria is now the second state in less than a month that has had an inquiry call for state-specific labour hire licensing. In the absence of a national response, a South Australian parliamentary committee has also recommended proceeding with its own licensing arrangements for labour hire operators.