Secondment Contracts: What Australian Businesses Need To Know

Secondments can be a smart, flexible way to get the skills you need without permanently hiring, especially when you’re growing quickly, running a time-limited project, or sharing talent within a group of companies.

But secondments can also get messy if the legal arrangements aren’t clear. Who is the employee’s “real” employer during the secondment? Who pays them? Who is responsible for work health and safety? What happens if there’s a performance issue, misconduct issue, or an injury at work?

This is where a well-drafted secondment contract makes a huge difference. It’s the document that sets out the rules so everyone knows where they stand - your business, the host business, and the employee.

Below, we’ll break down what a secondment is, what to include in a secondment contract, common traps for small businesses, and practical steps to make secondments work smoothly in Australia.

What Is A Secondment (And When Does It Make Sense For Your Business)?

A secondment is an arrangement where an employee is temporarily assigned to work for a different part of a business (or a different business altogether), usually for a defined period and purpose.

In practice, secondments commonly happen in situations like:

• Group businesses (for example, moving staff between related entities to meet business needs).
• Project work (you need a specialist skill set for a limited time).
• Backfilling (the host business needs cover during a busy period, parental leave, or long-term leave).
• Skills development (the employee gains experience in a different role or location).

Secondments are often discussed as a “flexible staffing solution”, but they’re still employment arrangements. That means employment law risks don’t disappear - they just become shared or more complicated.

It’s also worth remembering that “secondment” isn’t a magic label. Even if everyone calls it a secondment, what matters legally is the actual arrangement - who directs the work, who pays, and what the contracts say.

How Is A Secondment Different From Labour Hire Or A Contractor Arrangement?

For small businesses, confusion often happens because secondments can look similar to labour hire or contracting - but the legal risks and responsibilities can be very different.

Secondment Vs Labour Hire

In a secondment, the employee is usually already employed by the “sending employer” (the home employer), then temporarily works for the host.

In labour hire, a labour hire company supplies workers to a host, often as part of its regular business model. Depending on the state or territory and the industry, labour hire may involve separate licensing or regulatory obligations, as well as different industrial relations considerations.

Secondment Vs Contractor

In a contractor arrangement, the individual is running their own business and providing services under a commercial agreement. In a secondment, the worker is still an employee.

Misclassifying an employee as a contractor can create significant backpay and penalty risks. If you’re unsure whether you need a secondment or a contractor arrangement, it’s worth getting advice early so you can document it properly from day one.

Secondment Within A Group Of Companies

Secondments often happen within corporate groups (for example, parent and subsidiary entities). Even then, each company is a separate legal entity, and it’s still important to document who is responsible for what.

If you’re moving employees within a group, it can be helpful to map out the arrangement alongside your broader approach to transferring employees within group companies, because the legal steps can be different depending on whether the employee remains employed by the original employer or is actually transferred.

What Should A Secondment Contract Include?

A secondment contract is typically a written agreement that sets the rules between:

• the sending employer (the employer who normally employs the worker),
• the host organisation (where the worker will perform the work), and
• sometimes the employee (either as a party to the agreement or via a separate acknowledgment/variation).

There’s no single “one-size-fits-all” secondment contract in Australia. The right terms depend on how your secondment is structured, your industry, and the risks you’re trying to manage.

That said, most secondment contracts should cover the following.

1. Parties And The Structure Of The Arrangement

Start with clarity: who is the employer, who is the host, and what is the legal nature of the arrangement?

This section should confirm whether the employee remains employed by the sending employer throughout the secondment (this is common), and whether the host has day-to-day supervision while the sending employer remains responsible for employment obligations.

2. Secondment Role, Duties, Location, And Reporting Lines

Your secondment contract should clearly set out:

• the position/title and core duties during the secondment,
• where the work will be performed (including remote/hybrid arrangements if relevant),
• who the employee reports to at the host, and
• any limits on the host changing duties or location.

This matters because disputes often arise when the host expects the secondee to do tasks outside scope, or to work excessive hours, or to relocate with little notice.

3. Term, Start Date, End Date, And Extension Options

Secondments should have a defined duration. Your secondment contract should include:

• start and end dates,
• whether the arrangement can be extended and how (for example, by written agreement), and
• what happens at the end (return to the original role, return to a comparable role, or something else).

If the employee’s role is changing significantly, consider how this interacts with your existing employment arrangements. Where needed, you may also need to update the underlying Employment Contract (or issue a variation/secondment letter) so the documents stay consistent.

4. Pay, Superannuation, Expenses, And Chargeback Arrangements

This is one of the biggest “make or break” parts of a secondment contract.

Key questions to document include:

• Who pays salary/wages? Often the sending employer continues payroll.
• Will the host reimburse the sending employer? If yes, document how chargebacks work, timing, and any tax treatment. (For tax or GST questions, it’s worth confirming the right approach with your accountant.)
• Who pays superannuation? Usually the legal employer (sending employer) keeps paying, but it must be clear.
• What about allowances, bonuses, and overtime? Set expectations and confirm applicable policies/modern awards/enterprise agreements if relevant.
• Expenses (travel, accommodation, meals, tools): document approval processes and reimbursement.

Even where the host is effectively “funding” the employee, you want to avoid creating confusion about who the employer is - because that can increase risk if something goes wrong.

5. Work Health And Safety (WHS) Responsibilities

WHS is a critical area for secondments, because the employee may be working under the host’s direction, using the host’s workplace, equipment, and systems.

Your secondment contract should set out practical WHS processes and responsibilities, including:

• site induction and training,
• incident reporting and investigation,
• providing and maintaining equipment and a safe workplace,
• who manages return-to-work if there’s an injury, and
• how workers’ compensation coverage will operate in practice (and who will maintain it).

While contracts don’t override or remove statutory WHS duties, having clear written responsibilities reduces confusion and helps you implement safe systems from the start.

6. Direction, Supervision, And Performance Management

Secondments often fail when it’s unclear who is responsible for:

• day-to-day supervision,
• approving leave,
• performance feedback, and
• disciplinary action if there’s an issue.

A practical approach is to let the host supervise day-to-day work while requiring the host to escalate any performance or conduct issues to the sending employer for formal steps. That way, the legal employer retains control over employment decisions.

If your business anticipates needing to manage performance issues, it can help to align your secondment documentation with your broader HR processes, including show cause letters for serious concerns.

7. Confidentiality And Access To Information

During a secondment, employees often gain access to sensitive host information - such as pricing, supplier terms, customer data, product roadmaps, or internal procedures.

Your secondment contract should set clear confidentiality expectations, including:

• what information is confidential,
• what the employee can and can’t do with host information,
• how information must be stored and protected, and
• what happens at the end of the secondment (return/deletion of materials).

If personal information is involved (for example, customer or patient data), the arrangement should be consistent with your privacy compliance framework, and you may also need supporting documents like a Privacy Policy and internal procedures for handling data appropriately.

8. Intellectual Property (IP) Created During The Secondment

If the secondee creates anything valuable - like training materials, code, designs, processes, content, or documentation - you should clarify who owns it.

In many cases, the host will want to own IP created during the secondment (because it was created for the host’s benefit). Sometimes there will be shared ownership arrangements, or the sending employer may need a licence to use materials within the group.

The key is to decide upfront and document it, rather than arguing later once something valuable has been created.

9. Conflicts Of Interest And Non-Solicitation

If the host and sending employer operate in similar markets (or have overlapping customers), it’s worth including conflict rules. You may also need to address:

• non-solicitation of staff (so the host doesn’t “poach” the secondee or other staff),
• non-solicitation of clients, and
• limits on using knowledge gained during the secondment to compete.

These issues are often commercially sensitive, so they need to be drafted carefully to match your business reality and be enforceable.

10. Termination And Early Return

Secondments don’t always run to schedule. Your secondment contract should cover:

• how the secondment can end early (for example, on notice),
• immediate termination triggers (serious misconduct, loss of site access, safety concerns),
• what happens if the employee resigns, and
• what happens if the host no longer needs the role.

It’s also important to consider how this aligns with minimum notice obligations in the underlying employment relationship. For example, if the employment is terminated (not just the secondment), the employer may need to comply with statutory notice requirements and related issues like payment in lieu of notice.

Common Secondment Risks For Small Businesses (And How A Contract Helps)

Secondments are often arranged quickly - especially when a client needs help urgently, or when a related entity is short staffed. But moving fast without documentation can create avoidable risks.

Here are some of the most common problem areas we see, and how a secondment contract can help you stay on track.

Unclear Employer Responsibilities

If responsibilities are unclear, you can end up with both the sending employer and host assuming the other is handling payroll, leave approvals, WHS, or performance management.

A secondment contract should allocate responsibilities clearly so tasks don’t fall through the cracks.

Accidental Employment Claims Against The Host

In some cases, the way the secondment is run in practice can create arguments that the host became the true employer. This is more likely if the host controls everything (hours, duties, discipline) and the sending employer becomes hands-off.

A well-structured secondment contract won’t eliminate all risk, but it helps demonstrate the intended arrangement and sets up processes that align with it.

Confidentiality And Data Handling Issues

When someone moves between businesses, it’s easy for confidential documents, templates, or customer information to travel with them (sometimes unintentionally).

Your secondment contract should include clear confidentiality and information security rules, and your onboarding/induction process should reinforce them.

Workplace Policies Don’t Apply (Or Apply Inconsistently)

Does the secondee follow the host’s policies or the sending employer’s policies?

Often, the answer is “both”, depending on the policy type. For example:

• host WHS and site policies should usually apply while onsite,
• sending employer HR policies may continue to apply for things like leave requests or disciplinary processes, and
• the host’s IT and security rules should apply if the secondee is using host systems.

A secondment contract can set out which policies apply and how conflicts are handled.

How To Set Up A Secondment In Practice (A Simple Checklist)

Once you’ve decided a secondment is the right move, the key is to set it up properly so it’s easy to manage day-to-day.

Here’s a practical checklist you can follow.

1. Confirm The Business Purpose And Role Scope

Get clear on why you’re doing the secondment and what success looks like. If you can’t clearly describe the role and deliverables, it’s harder to write (and enforce) a secondment contract.

2. Review The Existing Employment Arrangements

Before seconding someone, check:

• their current role description and contract terms,
• any applicable award or enterprise agreement coverage, and
• existing restraints, confidentiality, or IP terms.

If needed, you may implement the secondment via a formal variation letter and ensure it aligns with the core Employment Contract.

3. Agree Commercial Terms Between Sending Employer And Host

If the host will reimburse wages or pay a secondment fee, document it clearly. This avoids disputes and keeps your accounting clean.

Even if the host is a related entity, you still want clarity - related companies can still end up in disagreements if expectations are not set upfront.

4. Put The Secondment Contract In Place Before The Start Date

Try not to “backdate” secondment arrangements. If something goes wrong in the early days, you want the paperwork already in place so you’re not reconstructing the deal later.

5. Run A Host Induction And Confirm Supervision Processes

Make sure the secondee completes any host induction and understands:

• who their host manager is,
• how to report incidents or issues, and
• site safety and IT requirements.

6. Plan The Exit (Before The Secondment Begins)

Think about what happens at the end. Will the employee return to their original role? What if the original role no longer exists? Will the host offer a permanent role?

A secondment contract should anticipate these outcomes and set expectations, so you’re not making critical employment decisions under pressure later.

Key Takeaways

• A secondment contract helps you use staff flexibly while clearly allocating responsibilities between the sending employer and the host business.
• Secondments can create legal risk if it’s unclear who pays the employee, who supervises them, and who manages WHS, performance, and disciplinary issues.
• A practical secondment contract should cover scope of work, term, pay and reimbursements, policies, confidentiality, IP ownership, and how the secondment can end early.
• Secondments within group companies still need documentation, because each entity is legally separate and employee arrangements can easily become confused.
• Getting the structure and documentation right upfront is usually far easier (and cheaper) than fixing a secondment after a dispute arises.

If you’d like help putting a secondment contract in place (or reviewing an existing secondment arrangement), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.