As a business owner, your ability to engage permanent workers and guarantee ongoing work can be unpredictable. For this reason, you might be considering labour hire. Temporary labour, or ‘labour hire’, is a working arrangement where workers are provided to a business, often referred to as ‘the host’ employer, by a labour hire company or agency for a fee. Under this arrangement formalised by a labour hire agreement, the labour hire company or agency is the worker’s employer and is responsible for managing their employee entitlements. This article will outline the advantages of a labour hire arrangement and guide your business to minimise and manage the associated risks.
What Are the Advantages of a Labour Hire Agreement?
There are several advantages to labour hire agreements.
Flexibility and Cost-Saving
As the needs of your business change, you might need to adjust the number of workers. This means that in busy times, you can engage additional workers to meet the demands of your business. While in flat periods, you can reduce the number of workers. This should ultimately reduce the overall costs for your business, particularly if you experience seasonal fluctuations.
Employment Risk
Labour hire workers are not employees of your business. Their direct contractual or employment relationship is with the labour hire company or agency that makes them available to your business. You can, therefore, hire workers and fire them at your discretion, without the risk of an unfair dismissal or another employment claim, subject to the terms of any contractual arrangements between the labour hire company and your business.
Other Advantages
There are many other advantages of a labour hire agreement, including:
- saved time and money on the recruitment process;
- the ability to trial workers before deciding whether to offer them employment;
- the removal of responsibility for disciplinary issues;
- the ability to engage skilled or expert workers for specific work projects; and
- simplified invoicing.
How Can I Minimise the Risks Associated With These Arrangements?
There are several ways that your business can minimise the risks associated with labour hire arrangements. First, an employment lawyer can provide tailored advice on the issues that may arise and how to manage them.
Documentation
All legal relationships are documented with a labour hire agreement. This includes the relationship between the labour hire company, your business, and the worker. The contract between your business and the labour hire company must set out the rights and obligations of the parties. Hence, you should ensure the contract reflects the relationship between the parties and what is expected of them.
Performance
Assuming all legal relationships are documented, the parties must perform per that contract. If the parties fail to do so, there may be grounds for one party to seek a remedy (e.g. damages) from the other for breach of contract. Therefore, you must have a clear understanding of your obligations.
Review
Any documentation and the performance of the parties’ relationship should be reviewed occasionally, mainly if additional or unique workers are being engaged. This is necessary to ensure that each party’s contractual relationships, obligations, and expectations remain clearly defined and relevant to the nature of the engagement.
Labour Hire Licences
Businesses providing labour hire services in Queensland, Victoria, South Australia and the ACT must be licensed. If you are hosting employees in one of these states or territories, you must check that the labour hire provider has a current and valid licence. Engaging employees from an unlicensed provider can result in significant penalties for you or your business.
Continue reading this article below the formWhat Should Be In My Labour Hire Agreements?
A well-drafted and all-inclusive labour hire agreement will reduce legal and commercial risks to your business. For that reason, it would be prudent to include the following terms at a minimum:
- services and fees;
- time-keeping obligations;
- payment and cancellation;
- work health and safety;
- insurance;
- intellectual property;
- confidential information; and
- termination.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
If you experience fluctuations in work, require specialist workers, or want more flexibility when making recruitment decisions, a temporary labour hire is a suitable option for your business. Whilst this arrangement has many advantages, it is imperative that you are aware of the risks involved and understand how to manage them best, both practically and in a written agreement.
If you need assistance understanding labour hire arrangements and associated risks, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
In a labour hire arrangement, your business will have a commercial relationship with a labour hire company or agency responsible for providing and paying workers. In a contractor arrangement, your business will have a commercial relationship with the business you provide services to. As a result, you will directly pay that business or a nominated person within that business.
Whilst it is not a requirement at law to have a written labour hire agreement, we strongly recommend that you do. A written agreement will protect your business interests and reduce unnecessary risks. In addition, it will create clear obligations and expectations for all parties in the arrangement.
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