Secondment of employees between different businesses can be a useful and cost-effective way to up skill staff, particularly in areas where development opportunities might not be readily available internally.
Additionally, the income derived from staffing secondments and the diversification of employee skill sets can impact favourably on a business’s bottom line.
Secondments can also be a useful solution for filling short term vacancies or positions that require a highly specialised skill set not readily available in the market place. However, there are a number of considerations that should be assessed before any secondment arrangement is finalised.
Benefits
Secondments provide opportunities to develop staff and grow skills through practical opportunities that their existing employer/organisation may not be able to offer because of limited scope, size or the industry in which they operate. This arrangement also benefits the employer by assisting with staff retention.
It is also a cost effective alternative to funding training as the cost of an employee’s wages are generally reimbursed through the host company. Additionally, the experience and skills gained will likely be practical, as opposed to theoretical classroom learning, allowing for immediate application on return from the secondment.
Secondments can be utilised as a tool for improving staff engagement in terms of providing on-going skill development. This is particularly the case where there are limited opportunities for internal career advancement or where there is a skill gap between the current role of an employee and the position above them but the organisation is restricted in its ability to develop people for career advancement.
Additionally, secondments may support innovation through the exposure to new systems, processes and ways of doing things. It can enhance an organisation’s client base through networking opportunities and the building of stronger relationships between individual clients and organisations.
Things to consider
There are several things to be mindful of when seconding staff to ensure any such arrangements are truly profitable for both parties and don’t result in any unnecessary complications. Some factors to consider include:
Setting very clear parameters, generally in the commercial contract with the host company that prohibits or discourages the offering of employment to the seconded staff member.
Privacy considerations should also be taken into account with restrictions being included preventing the sharing of client lists or trade secrets with the host company, where applicable. Similar parameters may need to be included in an addendum to the employee’s contract and discussed with them as a condition of accepting the secondment.
It is important to ensure the charge out rate is sufficient to offset expenses (which could include replacement staff salary, site uplift or other penalties, bonus payments, overtime, superannuation, payroll tax, leave accruals and annual leave loading, and any other monetary entitlement prescribed under a relevant industrial instrument etc.) that the seconded employee might be entitled to for the work performed for the host company.
If it is a long secondment period also consider any wage increases, for example, in line with any applicable enterprise agreement’s annual incremental increases or the Fair Work Commission’s annual wage review for example.
It will be incumbent on the employer to cover any shortfall in wages where miscalculation of the charge out rate is made. It is, therefore, critical that thorough calculations and cost predictions are made prior to committing a charge out rate with the host company.
Employers should discuss in detail with the host company what the secondment will involve to gain a thorough understanding of the scope of the work and associated costs that must be considered. For example, will the role involve regular travel, overtime, shift work etc. and will equipment need to be provided such as laptops etc?
Outgoing employees
There are a number of ways secondments work from an employee entitlements perspective.
The most common scenario sees the existing business continue to pay the wages for their seconded employee and accrue leave entitlements etc. while invoicing the host company for the costs of these payments. Under this type of arrangement, the period of secondment will generally count towards service with the employee’s employer.
In addition to leave entitlements continuing to accrue, this period may also need to be considered for the purpose of calculation the entitlement to severance pay, notice of termination, parental leave, long service leave, access to unfair dismissal and any other service-based entitlements.
The existing employer should also consider how to engage the employee during this time. A secondment could be one which continues an employee’s existing contract of employment but provides for a temporary amendment letter or it may require a completely new contract.
If the secondment role is quite different to the employee’s current contracted position, with different terms and conditions attached (i.e. travel, a change in location or work, change in hours etc.) this must always be negotiated and agreed to with the employee as well as the host company prior to the commencement of any such arrangement.
Consideration must also be given to what will happen following the expiration of the secondment (i.e. will the employee be entitled to resume their prior position). Before commencing any such arrangement, the employee should be consulted regarding any amendments to their existing contract/new terms and conditions and the implications of these. It is important to note that agreement must be reached before a substantial change in their contractual terms can be implemented.
Incoming workers
When hosting a worker from another business, while they will generally not be considered an employee of your organisation, it is important to treat them for all intents and purposes like any other employee of the business.
This means providing them with a copy of all relevant employee policies and familiarising them with the appropriate standards of behaviour, the company’s ethos, values and mission statement. All existing policies should be checked to ensure that they extend to workers on secondment.
The incoming worker should also be made aware of reporting structures, provided with full induction and safety training and protective equipment (if appropriate) that would be necessary for any new starter or visitor to the organisation.
From a health and safety viewpoint, the host organisation has a duty of care to provide a safe workplace for this person, regardless of the fact that they may not be an employee. Additionally, the host company should ensure that their insurance policy for workers compensation extends to such workers.
While the normal standards of termination and unfair dismissal do not apply to host workers, a worker still has the ability to make a general protections claims against a third party (such as their host employer) if they believe adverse action has been taken against them for a discriminatory reason, or because of a workplace right.
A secondment arrangement is not just undertaken between an employee and employer, but between two different businesses, and all aspects of the impending relationship should be given due consideration and discussed prior to the commencement of any such agreement being formed.
Like to know more?
CCI can provide more detailed information to assist you in preparing for secondments. For advice contact CCI’s Employee Relations Advice Centre on (08) 9365 7660 or email [email protected].
