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What Is a Secondment Agreement? (2021 Update)

What Is a Secondment Agreement? (2021 Update)

Many businesses send employees on secondment to gain work experience in another department or company. Read more about it here.

5th March 2021
Reading Time: 5 minutes

Secondments involve placing your employee in another department, business, or office temporarily. These arrangements are valuable because they encourage employees to develop professionally and widen their skillset. Along with this, employees will gain valuable insight into other businesses and bring this knowledge back to their internal role. 

Secondments are becoming more and more popular, especially in the legal industry where 86% of law firms encourage secondments. Employers use secondments to help nurture and widen an employee’s exposure to the workplace in the early stages of their career.

When on secondment, employees are generally placed in a different field. This allows employees to learn and develop skills to use once they return to their original position. Secondments also allow employers to deal with redundancies in their company or department. Secondments are useful, but can also raise important legal questions. Some of these questions include who the employee will be legally reporting to, and what to do if your employee resigns whilst on secondment.

In this guide, we’ll explain how secondments work and how they can be a great tool that increases employee engagement and fosters growth.

Table of Contents

  • Internal Secondments
  • External Secondments
  • Legal Issues
  • Key Summary 

Internal secondments

Internal secondments are the most basic form of secondment where an employee for an internal secondment transfers into another department in the same company. The main motivation for this is to encourage the employee to learn about how your business works in a different area. This will contribute to the employee having a broader perspective of the business and will also allow them to develop skill which may prove useful in their usual position. Many graduate programs work this way, allowing the employee and employer to eventually choose which Department is the best fit. 

Example

Jane is your employee and works in the marketing department. Jane receives an internal secondment to the human resources department for 3 months. This is because you want Jane to further develop her interpersonal skills and learn the recruitment process. Part of Jane’s role in the marketing team is to also promote employment opportunities at your business. Jane returns after her secondment more comfortable dealing with people and how the recruitment process works. This improves her performance on the job. The knowledge she has attained allows her to promote the business with more insight and expertise.

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External secondments

An external secondment is where the employee moves outside, rather than inside, the business. The secondment can be local, or it can even be international. These often occur between businesses that have professional partnerships or offices interstate and overseas. 

Example

You run a consulting business in Sydney and employ 6 graduates per year. You have a partnership with a law firm, Lawson & Sons, who have offices in multiple locations worldwide. You’ve chosen Sally, a graduate employed in your legal affairs Department, to go on secondment at Lawson & Sons. The office she will be on secondment is based in Tokyo and will be for a period of 6 months. Sally will return to your main office after 6 months. 

Legal issues

Several legal issues arise in external secondment agreements. This is due to the fact that your employee is technically working for someone else, whilst still being employed by you. Some of these issues include (but are not limited to):

  • What happens at the end of the secondment
  • Who will monitor your employee’s performance
  • How to end the arrangement early 
  • Who has a legal relationship with which party
  • Who is responsible for the employee’s safety
  • Termination of employee contract
  • What happens if the employee resigns
  • Laws that apply to the employee

Jurisdictional questions can also arise for employees who are working overseas. Usually, if your employee goes overseas, the laws in that country will apply. Australian laws similarly apply if you receive an employee on secondment.

All parties involved in external secondments for clarity should draft up a secondment agreement covering new employment terms for clarity. Businesses generally use two types of external secondments as follows:

Placement secondment

A placement secondment is when an employee of a company is temporarily placed at a third party company to do work for a specified time period.

Let’s say you run an accounting business and Drew is your employee. You receive a lot of auditing requests from automobile companies and want your employers to better understand their business. You agree with another company, EZ Auto (the host company), to allow Drew to work for them for 6 months to improve his understanding of automobile businesses. Drew works at EZ for 6 months. Drew remains your employee even as he works for EZ during this time.

In this case, the relationships are:

  • Drew: Your employee; hosted by EZ
  • Your company: Employer of Drew in agreement with EZ Auto
  • EZ Auto: In agreement with your business, host of Drew

Drew returns to your company with first hand experience at an automotive business, where he can use that knowledge to be more efficient at his work.

Transfer secondment

On the other hand, a transfer secondment creates an employment relationship between the host company and the employee. The original employment agreement is generally terminated. In some instances, a dual employee arrangement is created if the original employment contract is put on hold. An employee would not be paid by the host company, nor will they work for them in this scenario. Transfer secondments in practice help remove redundancies at your business by offloading work to another business.

Article Summary

  • Secondment Agreement: a document outlining terms when placing your employee in another department, business, or office temporarily

Secondment agreements are extremely useful in formalising the terms of a secondment, whether it be internal or external for the employee. It helps to be proactive in the face of multiple legal issues and provides assurance for you to focus on your employee’s professional development.

Conclusion

Secondments allow you to develop your employees’ skills and nurture their professional growth. This has the added effect of bringing a wider skillset to your business and a more wholistic understanding of it. It is important however, especially with external secondments, to draft up a secondment agreement dealing with any legal issues that could eventuate. 

If you have further questions about sending an employee on secondment and the legal questions involved, it may be wise to contact a business lawyer

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest lawyer marketplace.

Author
Dhruv Saggar

Dhruv is a Legal Tech Intern working in the content team at Lawpath who is highly curious about how technology is changing the legal landscape.