Labour Hire Agreements: What You Need To Know (2026 Updated)

Labour hire can be a game-changer when you need extra hands quickly, want to scale up for a busy season, or need specialist workers without hiring permanently.

But here’s the catch: labour hire arrangements sit right at the intersection of employment law, health and safety, and commercial risk. If your paperwork doesn’t clearly set out who is responsible for what, it’s easy to end up with disputes about pay, performance, accidents, confidentiality, or even whether someone was really an “employee” of your business.

This guide is updated for current expectations and common risk areas we’re seeing across New Zealand workplaces, so you can set your labour hire arrangement up properly from day one.

What Is A Labour Hire Arrangement (And Why Does The Contract Matter)?

A labour hire arrangement is usually a “three-way” working relationship where:

• The labour hire company supplies workers (sometimes called assigned employees or temps);
• You (the host business) supervise the day-to-day work at your site; and
• The worker performs the work.

In practice, labour hire is used for everything from warehousing and construction support to admin, events, healthcare, and seasonal work.

The reason the labour hire agreement matters is that your “real world” responsibilities can look different from what you assume. For example:

• You might think the labour hire company is responsible for all employment obligations, but you may still have key duties (especially around health and safety and day-to-day supervision).
• You might assume you can simply “swap out” a worker if it isn’t working out, but there may be process requirements, fees, minimum engagement periods, or notice periods.
• You might assume the worker is bound by your confidentiality rules, but unless your documents and onboarding line up, enforcing confidentiality can be messy.

A well-drafted agreement turns the arrangement into something predictable and manageable, instead of a grey area you only think about when something goes wrong.

Who Employs The Worker And Who Is Responsible For What?

This is the number one point to get crystal clear.

Most commonly, the worker is an employee of the labour hire company, and the labour hire company pays wages, PAYE, KiwiSaver (where applicable), leave entitlements, and handles HR administration.

However, as the host business, you’re typically responsible for the parts of the relationship that happen on your site and under your direction, including:

• Day-to-day direction and supervision (what work is done, how it’s done, deadlines, site rules);
• Workplace health and safety duties under the Health and Safety at Work Act 2015 (HSWA);
• Site access, inductions, and training for your hazards and procedures;
• Timekeeping and approving hours (depending on the model); and
• Reporting issues (performance, misconduct, incidents, injuries) promptly to the labour hire company.

Health And Safety: Your Duties Still Apply

Even if the worker isn’t your direct employee, HSWA can still apply to you as a PCBU (a “person conducting a business or undertaking”). In labour hire, there are often multiple PCBUs involved (the labour hire company and the host business), and the law expects PCBUs to consult, cooperate, and coordinate activities so workers are kept safe.

In a labour hire agreement, you’ll usually want clear clauses about:

• who provides PPE and who pays for it;
• who runs site inductions and what “minimum induction” must cover;
• incident reporting timeframes and investigation cooperation;
• fitness for work requirements (where relevant); and
• who can stop work if a safety issue arises.

This is one of those areas where “we’ll just work it out as we go” can become expensive fast.

Employment Responsibilities: Don’t Accidentally Create A Direct Employment Relationship

Even where the worker is employed by the labour hire company, your conduct and the reality of the relationship matter. If you treat the worker like they’re your employee in every respect (for example, you directly promise pay rises, set leave approvals outside the labour hire process, or handle disciplinary action independently), you may create confusion and risk.

The safer approach is to have:

• clear lines of communication (instructions can come from you, but employment decisions flow through the labour hire company);
• a documented escalation pathway for performance and misconduct; and
• site rules acknowledged by the worker through proper onboarding.

If you’re also hiring staff directly, it helps to keep your internal documents consistent too, including a tailored Employment Contract for your own employees.

What Should A Labour Hire Agreement Include?

A labour hire agreement is a commercial contract between the labour hire supplier and the host business. It should be practical, plain-English, and specific to how you actually operate.

Here are the core clauses you’ll usually want to cover.

1. Scope Of Services And Roles

• What roles can be supplied (including qualifications, tickets, licences, and experience requirements).
• Where work will be performed (sites, regions, remote work rules).
• Hours of work, rostering process, and how changes are approved.
• Whether you can request specific workers (and whether the supplier can refuse).

2. Charges, Minimum Engagements, And Payment Terms

Fees are often more complicated than they look at first glance. Your agreement should clearly set out:

• hourly charge rates and when different rates apply (overtime, weekends, public holidays);
• minimum shift lengths (e.g. 4 hours minimum);
• cancellation fees (including late cancellations);
• invoicing schedules and payment timeframes; and
• how disputes about timesheets are handled.

If your payment terms are unclear, that’s when you see billing disputes that chew up time and strain relationships.

3. Performance, Replacement, And Removal Of Workers

Labour hire is meant to be flexible, but flexibility still needs rules.

Your agreement should cover:

• how you report performance concerns (who, how, and within what timeframe);
• whether the supplier must offer a replacement (and when);
• your right to request removal of a worker from site (e.g. serious misconduct, safety risk);
• what happens to charges when a worker is removed mid-shift; and
• who handles formal employment processes (warnings, investigations, termination).

It’s also worth aligning this with your internal performance framework, especially if you have a documented performance management process for your own workforce.

4. Health And Safety Procedures

As mentioned above, your contract should clearly allocate responsibilities and require cooperation. Practical inclusions are:

• induction requirements and record-keeping;
• hazard reporting procedures;
• incident notification timelines and investigation cooperation;
• drug and alcohol policies (if relevant); and
• site access and supervision expectations.

5. Confidentiality And Intellectual Property

Labour hire workers often get access to sensitive information (customer lists, pricing, internal processes, systems, trade secrets). You’ll want to make sure confidentiality obligations actually bite.

Your labour hire agreement should cover:

• what information is confidential;
• how confidential information must be handled (including digital access and device rules);
• what happens when the assignment ends (return of property, revoking access); and
• ownership of any work product created during the assignment (documents, designs, code, processes).

Where appropriate, you may also want a standalone Non-Disclosure Agreement in place, particularly if the worker will be involved in strategic work, product development, or client negotiations.

6. Liability, Indemnities, And Insurance

This is where labour hire agreements can either protect you or leave you exposed.

Common issues to address include:

• who is responsible if a worker causes damage to property, stock, or equipment;
• who bears the risk if the worker injures someone or is injured;
• what insurance the labour hire company must hold (and minimum levels);
• what insurance you must hold as the host; and
• limits of liability (where appropriate and enforceable).

These clauses should be drafted carefully so they’re workable in real life, not just “standard template” language that doesn’t match your risks.

7. Non-Solicitation And Temp-To-Perm (Conversion Fees)

If you like a worker, you might want to hire them directly. Labour hire businesses often include:

• non-solicitation clauses (you can’t approach the worker directly); and/or
• conversion fees if you employ the worker within a certain period after placement.

This isn’t automatically “bad” (it’s a common model), but you should understand it before you sign. If you think direct hiring is likely, negotiate fair terms that reflect the reality of your hiring needs.

What Laws Do You Need To Comply With In A Labour Hire Setup?

Labour hire touches multiple legal areas. Your agreement is important, but it doesn’t override your legal obligations.

Employment Law Basics Still Matter

Even if the worker is employed by the labour hire company, employment law concepts are still relevant because you’re directing work and interacting with workers day-to-day.

Key risks we often see include:

• confusion about who approves leave, breaks, or shift changes;
• misalignment between what the host promises and what the labour hire employer can deliver; and
• unclear disciplinary responsibilities (which can lead to messy termination disputes).

If you’re the labour hire provider (rather than the host business), getting your own worker documentation right is crucial - including clear policies and contracts for employees and contractors. Many businesses also use a tailored Contractor Agreement where the arrangement is genuinely contracting (not employment).

Health And Safety At Work Act 2015 (HSWA)

HSWA is a big one. As a host business, you’ll usually control the work site, the equipment, and the tasks - which means your practical safety duties are significant.

Your agreement should support HSWA compliance by setting out:

• how the parties will consult and coordinate;
• who provides training and PPE;
• how safety incidents are reported and managed; and
• what happens if a worker refuses unsafe work.

Privacy Act 2020 (If Personal Information Is Shared)

Labour hire inevitably involves personal information: names, contact details, work history, sometimes ID documents, and background checks.

If you receive and store personal information about labour hire workers, you should treat it with the same care as employee data. That means only collecting what you need, keeping it secure, limiting access, and not keeping it longer than necessary.

If you collect personal information through your systems (for example, onboarding portals, timesheet apps, CCTV, access cards, or incident logs), it’s often appropriate to have a clear Privacy Policy and privacy notices that match what you actually do.

Industry-Specific Compliance

Some sectors have extra compliance layers (for example, licensing requirements, vulnerable person checks, or specific safety rules). If your labour hire workers are operating in regulated environments, your agreement should require workers to hold and maintain the right qualifications and allow you to verify them.

This is also where “one size fits all” contracts tend to fall down - because what’s reasonable in an office admin placement may be totally inadequate on a construction site or in a healthcare setting.

Common Labour Hire Risks (And How To Avoid Them)

Labour hire can work brilliantly when it’s structured properly. Most problems come from unclear expectations, inconsistent practices, and missing paperwork.

Risk 1: Unclear Supervision And Direction

If it’s not clear who is supervising the worker, you may end up with:

• work quality issues;
• safety issues (nobody “owns” the induction or hazard controls); and
• disputes about whether the worker followed instructions.

How to reduce the risk: Clearly set out who gives instructions on site, how tasks are assigned, and who signs off on hours or outputs.

Risk 2: The Worker Uses Your IP, Systems, Or Client Relationships

This is common when workers are placed into sales, account management, marketing, product, or operations roles.

How to reduce the risk: Include confidentiality and IP clauses, limit system access to what’s necessary, and ensure there’s a clean offboarding process (revoking logins, returning devices, confirming deletion of confidential info).

Risk 3: “Temp-To-Perm” Surprise Fees

You find someone great and offer them a job - only to discover there’s a conversion fee you didn’t budget for.

How to reduce the risk: Check the temp-to-perm clause before signing, and negotiate the conversion timeframe/fee so it’s fair. The earlier you raise it, the easier it is to sort out.

Risk 4: Liability Gaps When Something Goes Wrong

If there’s property damage, an injury, or a third-party claim, the parties can end up pointing fingers while costs pile up.

How to reduce the risk: Make sure the contract clearly allocates liability, requires appropriate insurance, and includes practical incident reporting and cooperation obligations.

Risk 5: Using The Wrong Document For The Wrong Relationship

Sometimes businesses use a generic service contract, a contractor template, or a casual employment template and call it “labour hire”. That can create major confusion if a dispute arises.

How to reduce the risk: Use a purpose-built labour hire agreement that matches the three-way structure and your operational reality. If you’re entering into a broader staffing arrangement, it may be better documented as a tailored Service Agreement with labour hire-specific schedules and safety obligations.

Key Takeaways

• Labour hire is usually a three-way arrangement between the labour hire company, the host business, and the worker, so it’s important your contract clearly sets out responsibilities.
• Even if you don’t directly employ the worker, you can still have significant health and safety duties under the Health and Safety at Work Act 2015, especially where you control the work site and day-to-day tasks.
• A strong labour hire agreement should cover scope of work, fees and payment terms, performance and replacement processes, health and safety obligations, confidentiality/IP, and liability/insurance.
• Watch for common “surprises” like minimum shift charges, cancellation fees, and temp-to-perm conversion fees if you want to hire a worker directly.
• Where personal information is shared or stored, privacy obligations under the Privacy Act 2020 should be reflected in your onboarding and data handling processes.
• Don’t rely on generic templates - labour hire arrangements need documents that match how your business actually operates and where the legal risk sits.

If you’d like help with a labour hire agreement (whether you’re the host business or the labour hire provider), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.