The essential clauses of a labour hire agreement

A labour hire agreement is usually the first document a provider and a host business sign, and it arrives in one of two ways. You are a provider who has been handed a template to fill in before you place your first worker, or you are a host business that has been given a provider's standard form and asked to sign on the dotted line. Either way, you are committing to the terms that will govern every worker who walks through the host's door, so the document deserves a clause-by-clause read before anyone signs.

The agreement itself is a commercial contract between two businesses. The provider employs the workers and sends them to perform work for the host, and the host pays the provider for their time. The workers are not parties to the agreement, which is exactly why it matters: it is the only place where the provider and the host set out who does what, who pays for what, and what happens when something goes wrong. The agreement does not displace the employment relationship between the provider and its workers, and it cannot override the workplace and safety laws that apply to both businesses regardless of what the contract says.

The essential clauses

What the provider supplies and what it charges

The opening clauses should pin down the scope of the services in enough detail that there is no argument later about what was promised. At a minimum, the scope should identify the categories of workers the provider will supply, the skills or licences they must hold, the work they will perform, and where and when they will perform it. The fee structure then attaches a price to each part of that scope, usually through a schedule of rates that covers:

• the types of worker covered by the agreement, such as mechanics, crane operators or administrative staff;
• the hourly rate for each worker type, including separate rates for day and night work;
• overtime and penalty rates that apply outside ordinary hours; and
• minimum engagement periods, such as a four-hour minimum for a call-out.

Most agreements put these details in a schedule of rates that the provider can update by written notice rather than fixing them in the body of the contract. That keeps the agreement workable as rates move, but the host should insist on a notice period before changes take effect and a cap on how often rates can change. The trap in a poorly drawn scope is creep: the host asks the provider's workers to do something outside the schedule, such as train the host's own staff or operate the host's equipment, and nobody has agreed what that is worth. A clause that requires the host to obtain a quote before a worker takes on work outside the scope, or that prices out-of-scope work at the standard hourly rate, closes that gap before it becomes a dispute.

How engagements run: fixed terms and ad-hoc work

Some host businesses want a worker for a defined period, and others want the flexibility to call workers in as demand fluctuates. The agreement should cater to both and make clear which arrangement applies at any given time. For a fixed term, the clause should specify the exact dates the host can engage the worker, the hours of work, and the meal and rest breaks, and it should say what happens when the term expires, such as whether the engagement renews automatically or must be rebooked.

For ad-hoc or on-call arrangements, the clause should set out how a request is made, how much notice the host must give, whether the provider must accept every request or only those it can fill within a stated time frame, and the minimum length of a shift. The critical drafting choice is the provider's obligation to fill requests. If the host needs guaranteed coverage, it should be paying for a guaranteed allocation of hours, not an on-call pool. The trap is open-ended language such as "the host may engage workers as required from time to time", which leaves notice periods, minimum hours and cancellation rights undefined, and that is exactly where fee disputes start.

Timesheets, invoicing and payment

Time is the product, so the agreement needs a reliable way of recording how much of it the host has used. Paper and digital timesheets are both common, and the clause should say who completes the timesheet, who approves it on the host's side, and what happens if the host disputes the hours recorded. The drafting choices that matter most are the approval window, meaning how many days the host gets to challenge a timesheet before it is taken as accepted, and the payment terms, meaning how many days after the invoice the host must pay and whether interest runs on late payment.

The timesheet does double duty: it drives the invoice to the host and the wages the provider pays the worker, and the provider, as the employer, carries the employer-side record-keeping obligations under the Fair Work Act 2009 (Cth) that these records help satisfy. If hours are never reconciled, small discrepancies compound into arguments at the end of each month, so the approval process is worth getting right. The agreement should also deal with tax: fees are usually stated exclusive of GST, with GST added on top, so the invoice should separate the two and the payment terms should make clear that the host pays the full amount including GST.

Workplace health and safety: who does what

The most important legal feature of a labour hire arrangement is that safety duties run to the worker from two directions at once. Under s 19 of the Work Health and Safety Act 2011 (Cth), the model law adopted in most states and territories, a person conducting a business or undertaking must ensure, so far as is reasonably practicable, the health and safety of workers whose activities it influences or directs. The host's site managers influence and direct the provider's workers every day, even though they do not employ them, so the host owes those workers a duty. The provider owes a parallel duty as their employer. Victoria operates its own occupational health and safety regime, and the same shape applies there: both businesses owe duties to the worker.

Because both businesses owe duties, the agreement cannot transfer the duty itself. A clause that makes the provider "solely responsible" for safety will not stop a regulator from prosecuting the host. What a WHS clause can usefully do is allocate practical responsibilities so that each duty is actually performed. A well-drawn clause will require the host to:

• provide a safe working environment, safe plant and equipment, and safe systems of work at its site;
• induct the provider's workers and give them site-specific safety instructions;
• notify the provider of hazards and of any incidents involving its workers; and
• cooperate with the provider on matters that affect the worker's safety, such as training and personal protective equipment.

The most valuable drafting choice is a written matrix of who does what, attached to the agreement, covering induction, supervision, hazard reporting, incident investigation and return to work after injury. Both parties should review it when the scope of work changes, not just when the contract is signed. The trap is a clause that looks comprehensive but assigns each task to whichever party is less able to perform it, for example making the provider responsible for maintaining plant that lives on the host's site. Duties should go to the party that controls the thing, or neither party will perform them.

Insurance and workers compensation

An injured worker can trigger claims through several channels at once, so the agreement should state who carries which cover. The provider, as the employer, is the party that must hold workers compensation insurance for its workers under the state scheme that applies to them. The host should maintain its own public liability cover. A host's public liability policy will not automatically extend to the provider's workers, so the clause should state which policy responds when a worker is injured at the host's site, and both parties should have their brokers confirm the position before signing.

The agreement should require each party to maintain the policies it is responsible for, provide certificates of currency on request, and notify the other if cover changes or lapses. It is worth getting a broker to map the covers before signing, because the interaction between workers compensation, public liability and the host's own policies varies with the work performed and the states involved. The trap is assuming the covers will sort themselves out, because the gap between them only becomes visible after an incident, at which point the parties are arguing about who pays rather than fixing the problem.

Compliance with workplace laws: awards, same job same pay and licensing

The provider is the employer, so the provider pays wages and entitlements, and the host is not generally responsible for the worker's pay. But the fees the host pays must be enough for the provider to meet its obligations, and the agreement should make each party's compliance obligations explicit. The compliance landscape now has three layers:

• Awards and agreements: the provider and the host may be covered by different awards or enterprise agreements, and the worker must always receive at least their own entitlements under the provider's instruments.
• Same job same pay: under Part 2-7A of the Fair Work Act 2009 (Cth), introduced by the Closing Loopholes reforms of December 2023, the Fair Work Commission can make a regulated labour hire arrangement order requiring the provider to pay its workers no less than the protected rate, which is what they would earn under the host's enterprise agreement if the host employed them directly. Orders are made on application by the worker, the host, the host's employees or a union, and not by the provider. Engagements of three months or less are generally exempt. Where an order is in force, the host must give the provider the information it needs to calculate the protected rate when asked in writing.
• Licensing: providers supplying workers in Queensland have needed a licence since the Labour Hire Licensing Act 2017 (Qld) commenced on 16 April 2018, and in Victoria since the Labour Hire Licensing Act 2018 (Vic) scheme began in April 2019. Unlicensed providers in those states face significant penalties, including up to three years' imprisonment in Queensland, and Victorian hosts must engage licensed providers.

The agreement should carry mutual warranties to back these layers up: the provider warrants that it holds any licence required and will pay its workers their legal entitlements, and the host warrants that it will comply with workplace laws at its site and will promptly give the provider the rate information it needs. The clause should also say what happens to fees if an order changes the rates the provider must pay, for example whether the host bears the increase. The trap is a fee schedule fixed for the life of the contract with no mechanism for adjusting rates when the protected rate changes, which leaves the provider paying the difference out of its own margin or in breach of the order.

How disputes are resolved

Because the host has no contract with the worker, most disagreements in a labour hire arrangement have to be resolved between the provider and the host, and the dispute resolution clause sets out how. It should say who the parties contact, how quickly complaints must be raised, and how the matter escalates if the initial contact does not resolve it, for example to senior managers and then to mediation before either party starts proceedings.

The drafting choice that matters most is the deadline for raising issues. A short window, such as seven days for a host to dispute a timesheet or a worker's conduct, keeps problems current and evidence fresh, while longer windows invite arguments about stale facts. The trap is treating the clause as boilerplate. If it sends every dispute to arbitration or to a particular court, that may be expensive or inconvenient for a disagreement that is really about one week of overtime. Match the process to the size of the disputes the agreement is likely to generate.

Non-solicitation: what happens if the host hires your worker

The provider's business is its pool of workers, so most agreements protect that pool against the host hiring workers directly and cutting the provider out. The two common mechanisms are a non-solicitation clause, which stops the host from directly engaging a worker for a defined period, and a fee or buy-out clause, which lets the host engage the worker if it pays a fee, usually a percentage of the worker's annualised billings or a fixed multiple.

Both mechanisms are restraints of trade, and a court will only enforce them if they protect a legitimate business interest and go no further than is reasonably necessary. A clause that blocks the host from ever hiring any worker, in any role, anywhere, is likely to be unenforceable, which makes the fee clause the safer structure for both parties: the host gets the worker, the provider gets compensated, and nobody tests the restraint in court. The trap is drafting the period badly. The restraint usually needs to run from the end of the worker's last engagement with the host rather than from the start of the agreement, and it should address what happens when a worker returns to the provider between engagements. A host may also want its own protection, such as a clause stopping the provider from poaching the host's permanent staff, which belongs in the optional clauses below.

Termination and replacing workers

The agreement should say how it ends and what survives the ending. Termination clauses typically cover notice periods, termination for convenience, and termination for breach, and they should also deal with what happens to workers already placed: whether engagements finish immediately, what the host pays for the notice period, and when outstanding invoices fall due.

Survival clauses matter in a labour hire agreement because the valuable parts are meant to outlive the contract. Non-solicitation, confidentiality and the dispute resolution process usually need to survive termination, and the agreement should say so expressly. The clause should also cover replacement. If a worker is absent, removed by the host, or unsatisfactory, the provider should be obliged to supply a replacement within a stated time, and the agreement should say who pays for any gap, such as whether the host pays for the first worker's unused hours.

Optional clauses to consider

Most labour hire agreements benefit from a handful of optional clauses that address the specific risks of the arrangement. Consider including:

• Indemnities and liability caps: worth including where the work is high risk, such as construction, warehousing or transport. The clause should say who indemnifies whom when a worker injures a third party or damages property, and cap the provider's liability, usually at the fees paid over a set period, with both parties excluded from consequential loss.
• Confidentiality and privacy: the host's confidential information should stay with the host, and the provider should warrant that it handles workers' personal information consistently with privacy law, including how it collects, stores and shares workers' data with the host.
• Work rights and background checks: the provider should warrant that its workers have the right to work in Australia and hold any licences the role requires, and the host should have the right to request checks, such as police checks, where the work demands them.
• Protection of the host's workforce and clients: a reverse clause stopping the provider from poaching the host's permanent staff or soliciting its clients, which matters where the provider's workers sit alongside the host's team for long periods.
• Force majeure: a clause dealing with events that stop the supply of workers, such as natural disasters or public health events, setting out what happens to engagements and fees when work cannot proceed.

How an Artificer Legal practitioner would review your labour hire agreement

An Artificer Legal practitioner would work through the document in the order the money and the statutory exposure sit: the scope and fee schedule first, then the same job same pay mechanism and licensing warranties, then the WHS and insurance allocation, then the restraints, and finally termination. That order reflects where a labour hire agreement most often fails, which is not in the boilerplate but in the clauses that decide how much the host pays and who wears the risk when a worker is hurt.

Specifically, we would push back on WHS clauses that purport to make one party solely responsible for safety, because they cannot displace the statutory duties and they create a false sense of security. We would insist on a rate adjustment mechanism that responds to regulated labour hire arrangement orders, and on licensing warranties for providers operating in Queensland and Victoria. We would narrow non-solicitation clauses to a defined period and worker type rather than a blanket restraint, and we would check that the timesheet approval and dispute deadlines are realistic for the people who actually have to operate them.

Who pays when a worker is injured at the host's site

Across all the clauses in this article, the one that most often decides whether a labour hire agreement works is the WHS and insurance allocation, because it determines who wears the cost when the worst happens. The worker is employed by the provider but directed by the host, both businesses owe that worker a duty, and the agreements that fail are the ones that leave the dual responsibility unallocated until an incident occurs. By then it is too late to draft the clause, and the parties argue about it in front of a regulator, an insurer or a court. The agreement that works is the one that assigns each safety task to the party that controls it, states which insurance policy responds, and is actually followed once the workers are on site.

If you are drafting or reviewing a labour hire agreement, the essentials are a clear scope and fee schedule, defined engagement terms, a timesheet and payment process, an allocation of WHS and insurance responsibilities, compliance warranties covering awards, same job same pay and licensing, a workable dispute process, an enforceable non-solicitation clause, and termination and survival provisions. A lawyer can help you get each of those right for the work you actually do.