Secondment agreements and the clauses that make or break a placement

A secondment agreement has just landed on your desk, either from a host business asking to borrow one of your employees, or drafted by your own HR team for someone heading out to a client, a joint venture partner or a sister company. Before you sign it or circulate it, it is worth knowing what this document actually controls. It decides who directs the secondee day to day, who pays for what, who insures the work, who owns what the secondee creates, and what happens if the placement sours. Get those answers wrong and the secondment agreement becomes the source of the very dispute it was meant to prevent.

Operationally, a secondment agreement is a side arrangement. It does not replace the employment contract; it supplements it for the duration of the placement. The employee stays employed by the home employer, which keeps paying wages and superannuation, while the host supervises the day to day work. What the secondment agreement does is record the allocation of control, cost and risk between the two businesses in a way that neither the employment contract nor a handshake can. It also cannot waive the minimum standards that attach to the employment: the National Employment Standards in Part 2-2 of the Fair Work Act 2009 (Cth) are minimum entitlements that cannot be displaced by agreement (s 61).

The clauses that do the work

Most secondment agreements need around ten clauses to be safe. The list below follows the order in which the questions actually arise: who is going, who is in charge, who pays, and what happens at the end.

Who is moving, what they will do, and for how long

The agreement should name the home employer, the host and the employee, describe the duties, the location, the start date and the expected end date, and set out how an extension is approved. A fixed end date matters more than it looks: it is what stops a "temporary" placement drifting into an indefinite one, which is when the other clauses start to strain. Three details deserve particular care:

• Duties: describe them specifically enough to test the placement against the employee's classification under any modern award or enterprise agreement that applies.
• Hours: state whether the role is full-time or part-time and set core hours, because penalty rates, overtime and the superannuation base all hang off this.
• Extension process: require written confirmation before the end date, rather than letting the placement roll on by conduct.

Who stays the employer and who gives the directions

This is the clause the rest of the agreement hangs off. It should state plainly that the employee remains employed by the home employer throughout the secondment, and that the host may direct the day to day work while the home employer keeps its overarching employment responsibilities. The reason this allocation is legally significant is that control attracts duties. Under the Work Health and Safety Act 2011 (Cth), a person conducting a business or undertaking owes a duty to workers whose activities in carrying out work are influenced or directed by it (s 19(1)(b)), and a "worker" includes anyone carrying out work in any capacity for the business, even if employed by someone else (s 7). The host of a secondee is therefore a duty holder whether or not it signs the pay cheques. Two drafting traps deserve attention:

• Blurring the line: if the drafting gives the host the power to hire, fire, change pay or discipline the employee, or if the parties behave as if it had, the host can find itself treated as the de facto employer, with the full set of employer obligations that go with that label.
• Silence: if the agreement never says who remains the employer, a dispute about who is liable for what will be resolved by inference from conduct, which nobody controls.

Pay, superannuation and who reimbures whom

The usual structure is that the home employer keeps paying wages, superannuation and any allowances, and the host reimbures the home employer under the agreement. That sounds simple, but the clause needs to say exactly how the recharge is calculated:

• Superannuation: the Super Guarantee rate is 12% of ordinary time earnings, the final scheduled increase that took effect on 1 July 2025, and from 1 July 2026 employers must pay super on each payday under the new payday super rules. The agreement should not let the recharge maths quietly understate the super component.
• On-costs: spell out whether the recharge covers payroll tax, workers compensation premiums and leave loading, or only base salary.
• Overtime and allowances: confirm who pays if the host's roster triggers penalty rates or overtime that the employee's home hours never did.

Leave and other entitlements through the placement

Annual leave, personal/carer's leave and the other National Employment Standards keep accruing while the employee is on secondment, because the employment continues. A period of service with the home employer counts towards continuous service for the purposes of the Fair Work Act 2009 (Cth) (s 22), and a clause that says "no leave accrues during the secondment" is ineffective to the extent it falls below those minimums. What the agreement can usefully do is say who approves leave requests and how they are recorded, so the home payroll and the host's roster do not talk past each other. It is also worth confirming that a secondment does not reset any long service leave clock, which state and territory long service leave laws protect.

Which policies apply

The secondee is usually subject to two sets of workplace policies: the home employer's, because it remains the employer, and the host's, because it controls the workplace. A sensible clause lists which policies apply during the placement and gives a priority rule for conflicts, typically that the host's workplace policies govern while on site and the home employer's govern the employment relationship. It should also set expectations for performance feedback: who raises concerns, how escalation works, and what happens if the host is unhappy with the secondee's performance. Without that, performance problems bounce between the two businesses while nobody takes ownership.

Confidentiality and privacy

The agreement should bind the employee and both organisations to keep each other's confidential information confidential and use it only for the purposes of the secondment. For a placement that involves handling customer or client data, the privacy side needs attention too. The Privacy Act 1988 (Cth) and the Australian Privacy Principles apply to how personal information is collected, used and disclosed, and the small business exemption that has shielded many smaller hosts is being removed under the current privacy law reforms. If the secondee will touch personal information in new systems, the agreement should say which entity is the holder of that information for privacy purposes and what each side may do with it.

Who owns what the secondee creates

If the secondee writes code, designs products, drafts documents or develops processes, ownership has to be allocated. The default position under the Copyright Act 1968 (Cth) is that the employer owns copyright in literary, dramatic, musical and artistic works made by an employee in the course of employment (s 35(6)), and that position can be excluded or modified by agreement (s 35(3)). So for an external secondment the default is that the home employer owns what its employee creates, even though the work was done at the host's premises and on the host's time. If the host needs to own the deliverables, the secondment agreement needs an IP assignment clause, often backed by a separate IP assignment deed, and the parties need to decide what happens to background IP the employee brings in and leaves behind:

• Background IP: carve out what the secondee and the home employer bring into the placement, so the host does not accidentally acquire it.
• Foreground IP: allocate new work clearly, including the point at which ownership transfers if the deliverable is only finished after the placement ends.
• Moral rights and consents: where the employee's work product is protected by moral rights, the assignment package should deal with the required consents.

Work health and safety, insurance and workers compensation

Both businesses owe WHS duties during the placement: the home employer as the employer and the host because it influences and directs the work. The agreement should record who does what in practice: the host provides the safe workplace, the induction, the equipment and the supervision, and both sides cooperate on incident reporting. On insurance, the clause should say who holds public liability and professional indemnity cover and, if relevant, how the parties share the risk of a claim. Workers compensation is more delicate: it is a state-based scheme and the policy usually sits with the employer, but a placement that crosses state borders, or that runs long enough for the host to look like the effective employer, can raise questions about which scheme responds. That is a question worth taking advice on rather than guessing at, and the agreement should at least require the parties to confirm their cover and follow the claims process in the state where the injury occurs.

Restraints and non-solicitation

Secondments put employees inside a host's client relationships, which is precisely why the return leg matters. A restraint of trade is enforceable only to the extent it protects a legitimate business interest and is reasonable in scope, duration and geography, and the same logic applies to non-solicitation clauses. The agreement should address conflicts of interest during the placement, confidentiality that survives its end, and any non-solicitation of the host's clients or the home employer's staff. Overreaching restraints are worse than none, because a court will not rewrite an unreasonable restraint, so the clause should be drawn to match the actual risk the placement creates.

Ending early and getting things back

The agreement needs an exit lane. That means a notice period for either side to end the secondment early, the ability to terminate immediately for serious misconduct or safety concerns, and a handover process so the employee returns cleanly to the home employer. It should also deal with the mechanics of separation: return of property, return or destruction of confidential information, revocation of system access, and a check on what the secondee produced so the IP clause is actually given effect. If the placement converts into a permanent move to the host, that is a different transaction, and the agreement should say the parties will deal with it separately rather than let it happen by default.

Extra clauses to consider when the placement is unusual

The clauses above cover the standard placement. Depending on how the secondment is structured, a few more may earn their place:

• Deed of novation or new employment contract: include this if the legal employer is going to change, or if the placement is expected to become permanent. Note that a transfer of employment can trigger the transfer of business provisions in Part 2-8 of the Fair Work Act 2009 (Cth), which can carry the employee's service and industrial instruments across to the new employer when the employment transfers within three months and there is a connection between the businesses (s 311).
• Labour hire licensing check: where the arrangement is really the host filling its own ongoing staffing needs with supplied labour, rather than a time-limited talent exchange, state labour hire licensing schemes in some states may apply. If the facts look like labour hire, get advice before signing.
• Restraint carve-outs: where the secondee will return to the home employer but has worked closely with the host's clients, define precisely what the restraint protects and what the secondee may still do afterwards.
• Data and systems schedule: where the secondee will use both organisations' IT systems, remote access or a personal device, a short schedule on system access, data security and deletion on exit is worth the page.
• Conversion mechanics: if either side might want to make the placement permanent, set out who can raise it, when, and any agreed recruitment fee or notice of interest, so the end of the secondment is negotiated rather than sprung.

How an Artificer Legal employment lawyer would review your secondment agreement

If you are on the receiving end of a draft, the first thing an Artificer Legal lawyer would check is the employment and direction clause, because every other allocation follows from it. We would push back on blanket IP assignments that sweep up the employee's and the home employer's background IP, on unilateral termination rights that let one side end the placement without notice, and on restraints drafted wider than the placement's actual risk. We would insist on a written cost-allocation mechanism, a clear policy priority rule, mutual confidentiality obligations, and a WHS and insurance clause that reflects who actually controls the workplace. The order matters: settle who remains the employer first, then the money, then IP and safety, then the exit. Working through a secondment agreement in that sequence is usually quick, because most placements are structurally simple, and the value is in catching the clause that quietly shifts risk onto your business.

The employment and direction clause

If a secondment goes wrong, the dispute usually resolves to one question: who was in charge of the employee's work? The employment and direction clause is the answer in writing. It determines who owes the WHS duty, who holds the employer obligations, whose insurance responds, whose default IP ownership applies, and who carries the cost when the placement ends early. A secondment agreement is really a control-allocation document, and this clause is the allocation. Draft it clearly, and the rest of the agreement does its job. Draft it vaguely, and every other clause is a negotiation waiting to happen.

The points to keep from this article: a secondment agreement supplements the employment contract and cannot displace the National Employment Standards; the employee stays with the home employer while the host directs the work; pay, superannuation and cost allocation need to be in writing; WHS duties fall on both businesses; IP ownership defaults to the employer but can be varied by agreement; and the exit, including restraints and the return of property and information, needs just as much care as the start.