A secondment arrangement typically occurs when an employee or group of employees go to work for a different part of their employer’s organisation, or a different employer completely such as a client or a customer. The arrangements undoubtedly bring huge benefits to both employer and employee alike provided they are undertaken correctly.
Understanding Secondment Law for Employers and Employees
If you are interested in undertaking a secondment arrangement in your business or organisation what are the main questions you should be asking yourself? The fundamental ones are as follows:
1. Why arrange one?
First things first, you should be carefully weighing up the disadvantages and the benefits of undertaking such an arrangement.
Some of the main benefits are:
- It enables the secondee to gain experience in a different area
- Employers can avoid temporary redundancies and potentially resituate employees to the busiest part of its organisation managing workflow
- It can provide temporary assistance to the host employer, which ultimately builds better business relationships and encourages joint ventures
It should be noted from the outset that secondment arrangements should be properly agreed and documented as unanticipated costs and legal liabilities could result if the arrangement is not properly processed. It is important that they are formally documented in order to ensure the legitimate interests of all parties involved are protected, this includes the original employer or ‘seconder’, the host employer and the employee or ‘secondee’.
2. How do I select secondees?
The process for selecting secondees needs to be fair, transparent and objective to reduce the risk of discriminating on grounds of sex, age, race etc. For example, the exclusion of all part-time workers from undertaking a secondment arrangement may lead to many working mothers being excluded, which could lead to a claim based on indirect sex discrimination.
It is always advised to get the employee’s consent if the secondment involves a different role or location of work as this is potentially a substantial change to the employee’s terms and conditions of original employment. This is important because a significant change to the terms of employment at short notice risks the employer being in breach of the implied duty of trust and confidence owed to the employee which could allow them to resign claiming constructive unfair dismissal. The employer needs to act reasonably, even if the employee’s contract contains a right for them to second the employee.
If the employee is reluctant to undertake the secondment arrangement but the arrangement is only a variation of their original employment contract, the original employer (seconder) can press ahead and draw their attention to their already existing contractual obligations that they have agreed to, including the new varied ones in the secondment arrangement.
An issue would arise if the original employer had not sought consent from the employee, who was reluctant about the arrangement because it was substantially different in terms of role and location from the original employment contract.
3. How should the secondment agreement be worded?
The wording of the arrangement is incredibly important because as discussed, unanticipated consequences can occur if they are not executed correctly. The most difficulties come with the Tripartite agreement, which is a secondment arrangement between the original employer, the employee and a host employer (client or customer).
There should be handover provisions requiring the secondee to co-operate in a smooth transfer of duties from their original position to the new arrangement.
In this instance, there is no need for an agreement between the host employer and secondee because the secondees obligations still remain with their original employer. This should be reflected in the arrangement which outlines the secondee’s practical duties owed to their original employer.
The agreement should state that the secondee is still employed by the original employer, and the terms and conditions contained in that original written contract of employment will remain in force whilst they are undertaking the placement.
4. How is salary, benefits and expenses calculated?
It is usual that the secondee is paid by the original employer who is then reimbursed by the host with an additional fee to make the arrangement profitable. It is important that the original employer continues to pay the secondee because the salary is such a fundamental part of the employment contract that it may be difficult to show the original employer is still the secondee’s employer if the host takes control of payment. This similarly applies to contractual benefits which should still be upheld by the original employer.
In terms of expenses, the original employer and host employer need to have a written agreement as to who will meet them. It is usual that the host incurs them and then they are reimbursed directly back by the original employer.
5. What happens to the employee’s duties to their original employer?
Employees have a number of implied duties to their employer such as the duty of fidelity, the duty to obey lawful and reasonable instructions and the duty to exercise reasonable and careful skill in carrying out their work. The wording of the agreement needs to stipulate that the secondee’s duties are still primarily owed to the original employer, but that they are required to comply with the host’s internal policies and procedures throughout the duration of the secondment. This ultimately strengthens the position of the original employer in the event that it needs to take disciplinary action against the secondee for failing to comply with the host’s policies.
6. What if the interests of the host employer conflict with mine? (me being the original employer)
There may be circumstances where a conflict arises between the host’s obligations or requirements of the employee and the employee’s existing obligations and requirements to its original employer. If this is to happen it should be drawn to the attention of HR and the line manager at the original employer immediately.
The agreement must stipulate that the original employer’s interests are put above the host employer’s.
7. Who deals with disciplinary and grievance procedures?
The original employer should retain control over appraisals, disciplinary sanctions and grievance procedures. This should be stipulated in the agreement from the outset so as to prevent the host employer from assuming the employment relationship. It should be stated that the host will provide input if it is required to do so and the assistance the host may be called to give should be outlined from the outset.
Employers should do their utmost to ensure that an employee is not disadvantaged because they are on a secondment placement.
8. What about sickness absence and annual leave?
The original employer may allow the host employer to manage short-term sickness absence by allowing the secondee to follow its absence reporting procedure.
It should be stipulated that sickness that exceeds seven consecutive days requires a note from the doctor. It may be that the host insists on automatic termination of the arrangement after a number of days off for sickness with the requirement that the original employer also provides a substitute.
Ultimately, all correspondence regarding sickness that is long-term and serious (longer than seven days) should be made to the original employer after the sickness-reporting procedure of the host employer is followed. This is because the original employer owes a duty of care to the employee.
It is very important that sickness that relates to disability or pregnancy is not penalised because this would be a breach of the Equality Act 2010.
The original employer has ultimate control over annual leave but the host will have the right to approve holiday absences. The secondee’s annual leave will continue throughout the arrangement, so the host should make the secondee aware from the outset of the internal restrictions and processes if there are any.
The secondee is entitled to the same maternity leave and pay and other family leave as individuals working directly for the original employer. It is very important that the arrangement should never be terminated by the host or original employer following news of a pregnancy or the need for family leave; this undoubtedly paves the way for an unlawful discrimination claim.
The original employer will usually be required to pay statutory maternity or paternity pay.
If the leave is long-term consider a replacement but also the resumption of the secondment upon the employee’s return.
10. What happens regarding intellectual property?
It is usually the case with most secondment agreements that the host gains ownership of any intellectual property the employee comes up with during the arrangement. This is usually done by inserting a clause in the agreement.
11. How should I protect confidential information?
There is an implied duty of fidelity between the employee and the original employer. However, in the instance where the secondee goes to work for the host employer, this implied duty falls away. In this instance, the protection of confidential information is tricky because technically the only thing preventing the employee divulging potentially very confidential info or even trade secrets is post-termination restrictions.
The original employer can protect its confidential information in two ways:
- Insert a provision in the secondment agreement to prevent the host employer employing the employee for a fixed period of time after the secondment arrangement has ended.
- The original employer could ask the employee to sign an amended employment contract which contains restrictive covenants preventing the employee from working for the host employer for a set period of time after the secondment ends.
It is important that there is a clear connection between the clause inserted in the secondment arrangement and the legitimate business interest of the original employer. It may be that the provisions listed above are not enforceable, but either way it acts as a good deterrent to the employee. They are likely to be enforceable if they go no further than is absolutely necessary to protect the interests of the original employer’s business.
The host employer will also want to protect its confidential information, as the secondee could go back to their original employer with very valuable information. In this instance, the host employer can stipulate that the secondee enters into a separate confidentiality agreement, which has restrictive covenants protecting it from the disclosure of its trade secrets and confidential information after the secondment arrangement has ended.
12. How do I terminate a secondment?
As with employment contracts, the agreement should stipulate a right to terminate the secondment by giving notice. As with employment contracts, there should also be a clause inserted to terminate the arrangement immediately if need be such as an act of gross misconduct or the employee fails to be employed by the original employer.
It is advisable that the original employer retains the right to terminate the secondment arrangement without notice in instances where the commercial relationship has ended or the employee needs to return to the organisation immediately.
The rights and obligations of the host and the original employer should be stipulated in writing from the outset.
13. What if the employee wants to terminate the secondment?
It is not a requirement that the secondee should be able to terminate the arrangement. If it is permitted the terms of return to the original employer should be made clear. If the arrangement does not go according to plan on part of the employee’s behaviour, this is a potential breach of obedience to the original employer and disciplinary procedure is able to be invoked.
14. How do I accommodate the secondees return to work?
It must be made clear from the outset in the arrangement whether the secondees original role will be kept open for them during the arrangement. An unfair dismissal claim is minimised if the secondee has undertaken the arrangement knowing that there would be no guarantee of a position at the end of it, providing a fair procedure has also been followed meaning the employee has been consulted and potential alternative positions have been considered.
A fair redundancy procedure is followed if the original employer has considered alternative roles within its organisation and the original position has become redundant since the employee has undertaken the arrangement.