Temporary labour, or labour hire, is a working arrangement where workers are provided to a business by a labour hire company or agency that is responsible for paying the worker.  These types of arrangements have become more common in recent years, particularly for businesses in these tough economic times. The legal contract used to hire temporary labour is called a labour hire agreement.

What are the advantages of a labour hire agreement?

There are a number of advantages of a labour hire agreement, including: 1.     Flexibility and cost saving – As the needs of the business change the number of workers can be easily adjusted.  This means that in busy times additional workers can be engaged to meet the demands of the business, while in flat periods the number of workers can be reduced.  This should ultimately reduce the overall costs for the business, particularly in businesses that experience seasonal fluctuations. 2.     Employment risk – Labour hire workers are not employees of the business in which they work, they are employees of the labour hire company or agency that makes them available to the business.  Workers can be hired and fired by business at its discretion without risking an unfair dismissal claim, subject to the terms of any contractual arrangements between the labour hire company and business. 3.     Other advantages – There are many other advantages of a labour hire agreement, including saving on recruitment costs, enabling the business to try workers before deciding whether to offer them employment, removing responsibility for disciplinary issues and simplifying invoicing.

How does my business minimise the risks associated with these arrangements?

There are a number of ways that a business can minimise the risks associated with labour hire arrangements, including: 1.     Documentation – Make sure that all legal relationships are documented with a labour hire agreement.  This includes the relationship between the labour hire company and business and also the labour hire company and the worker.  From the business’s perspective, the contract between the business and the labour hire company must set out the rights and obligations of the parties, particularly in relation to supply of workers, termination, insurance and invoicing.  Above all, make sure that the contract accurately reflects the relationship between the parties and what is expected of each of them. 2.     Performance – Assuming all legal relationships are documented, the parties must perform in accordance with that contract.  If the parties do not perform in accordance with the contract then there may be grounds for one party to seek a remedy (e.g. damages) from the other for breach of contract. 3.     Review – Any documentation and the performance of the relationship of the parties should be reviewed from time to time, particularly if additional workers are being engaged, to ensure that it remains relevant and appropriate.  It may have to be changed so it remains binding on them.

To Conclude

Temporary labour can be a good idea for business and is capable of maximising the flexibility of businesses in these tough economic times. Use a labour hire agreement to document the legal relationship between the parties.

Lachlan McKnight

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