Labour Hire Agreement

What is a labour hire agreement?

A labour hire agreement is a contract between a labour hire agency and a business, where the agency supplies workers to the business for a specific period or to complete specific tasks. Essentially, these workers remain employees of the labour hire agency but work under the direction and supervision of the host employer. 

What are the benefits of a labour hire agreement?

Benefits of a labour hire agreement for your labour hire agency

Having a written labour hire agreement provides a clear framework for both your agency and your business clients, outlining the terms and conditions of service. This helps prevent misunderstandings and disputes, as the agreement clearly specifies responsibilities, duties, and expectations for both parties. It also ensures that all parties are aware of their rights and obligations, developing a fair and transparent business relationship. 

Benefits of a labour hire agreement for businesses

Businesses choose labour hire agreements for multiple reasons. As we’ve touched on already, one of main reasons is the flexibility they offer. Businesses are able to quickly scale their workforce up or down based on demand without the long-term commitment to hiring permanent full-time employees. 

Secondly, in some cases, labour hire agreements can be more cost-effective than traditional methods of employment. This is because recruitment, costs and payroll are all handled by the labour hire agency, allowing businesses to save a substantial amounts of costs. 

Another important factor is the access businesses get to skilled workers. Labour agencies train their workers to acquire the necessary skills and expertise needed for specific jobs. This means that businesses are able to hone in on workers that suit their needs. 

What needs to be included in a labour hire agreement?

A strong and legally compliant labour hire agreement includes several components: 

1. Parties involved

Clearly identify both the labour hire agency and the host employer, including their full legal names, addresses, and contact details. 

2. Scope of services

Define the tasks, duties, and responsibilities of the hired workers in detail to avoid any misunderstandings. Outline specific job roles, required qualifications, and certifications. 

You should also consider what training is required to complete the job and who is responsible for providing the training. Similarly, if specific equipment is required for the hired workers to complete the job, the agreement will outline the details and specify who is responsible for providing it.

3. Duration

Specify the contract length, including start and end dates, and provisions for extension or termination. Address what happens if the project is completed early or if additional time is needed.

4. Payments and rates

Outline the payment structure, including hourly rates, overtime, and any additional costs. Specify how and when payments will be made (e.g., weekly, fortnightly, or monthly), penalties for late payments, and the process for disputing charges. 

It is also important to note in the contract if the hired workers are covered by a Fair Work Award. A Fair Work Award outlines the minimum pay rates and conditions of employment. If the hired workers do fall under a Fair Work Award you will need to ensure that the contract complies with the specifications of the Award. 

5. Supervision and control

Detail how the workers will be supervised and by whom. Identify the person(s) responsible for overseeing the workers and provide clear guidelines on reporting and accountability. 

This ensures that the parties understand their obligations under the contract. If you are the labour hire agency this information is critical as you will need to relay this to the hired workers or business, and ensure that it is reflected in any contract between you and the hired workers or the business.  

6. Compliance

Ensure the agreement complies with Australian labour laws and regulations, including occupational health and safety standards. Reference specific laws and regulations relevant to the work being performed.  

Labour hire licenses are mandatory in Queensland, Victoria, and South Australia. If you are a labour hire agency operating in one of these States, you are required to hold a licence and be registered with the State authority.

At the date of writing this article, the Australian Capital Territory has a licence scheme pending, and in Western Australia, a licence scheme is under decision. New South Wales, Northern Territory and Tasmania currently do not have a licence scheme in place. 

7. Insurance, liability and indemnification

Clarify the insurance coverage for the workers and the responsibilities of each party in case of accidents or injuries. This includes the types of insurance required, such as workers’ compensation and public liability insurance, and who is responsible for maintaining these policies.  

It’s also important to detail the indemnification responsibilities of each party, protecting against any potential legal claims arising from the agreement. 

When drafting indemnity clauses, a key consideration if you are a host employer is to ensure that you are indemnified by the labour hire agency for any claims brought by hired workers for payment of entitlements that are typically payable between an employer and employee. 

8. Dispute resolution

Include procedures for resolving any disputes that may arise during the term of the agreement. Outline the steps to be taken in case of a disagreement, such as mediation, arbitration, or legal action.

9. Confidentiality

Include provisions to protect any confidential information shared between the parties. Define what constitutes confidential information, how it should be handled and what forms of permitted disclosure are acceptable.

12. Termination

Clearly outline the conditions under which either party can terminate the agreement. Include details on the following:  

• required notice period;  
• financial or legal consequences of early termination;  
• on what basis the contract can be terminated early;  
• if the contract is terminated, what impact does that have on the completion of any current jobs and the payment of fees; and  
• Is there any opportunity to remedy a breach of contract to avoid termination. 

Is a labour agreement right for you?

We often advise a labour hire agreement based on various circumstances, however it’s always best to speak to one of our specialist commercial lawyers first, before making a decision.  

We want to make sure you’re making the right decisions for your businesses. In saying this, some a labour hire agreement could be beneficial for your business if: 

1. Your business experiences fluctuating demand;
2. Requires specific skills for a short-period of time;
3. Your budget allows hourly rates for labour hire; and
4. A temporary workforce won’t interfere with your existing team dynamics.

Seeking the help of a lawyer can ensure the legal needs of the agreement are met and can prevent the risk of missing information that can lead to disputes and unexpected liabilities.

Key takeaways

A labour hire agreement can present a flexible and efficient solution to managing workers. If you’re looking to scale up quickly, access specialised skills, or reduce administrative burdens, a well-structured and tailored labour hire agreement can be invaluable.

At Progressive Legal, our experienced commercial lawyers have drafted and reviewed labour hire agreements for various businesses across Australia.

If you want to discuss whether a labour hire agreement is right for you or if you want our team to draft a tailored and professional agreement for you, get in touch with us today. Call us on 1800 820 083 or make an enquiry below.

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