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Labour-for-Hire in New Zealand: Navigating Laws on Triangular Employment

Key Takeaways

  1. A triangular employment arrangement is a situation where the employer (the agency) arranges for the employee’s placement or assignment with a third party (controlling third party). 
  2. It is ‘triangular’ because there are three parties to an employment arrangement, with each party having distinct relationships with one another. 
  3. Common situations where triangular employment happens include where an employee is employed by a recruitment or employment agency, and is sent on work assignments to another organisation. Sometimes this is called labour-for-hire or “temping”. Other situations include where an employee is on a secondment from their employer to a host organisation.

What is Triangular Employment?

Triangular employment refers to a situation where an employee works for a company (the host organization) but is officially employed by another entity (the employer). This arrangement typically involves a third party, like a labor hire company or an Employer of Record (EOR), which formally employs the worker and then contracts them out to work for the host organization. In New Zealand, the Employment Relations (Triangular Employment) Amendment Act 2019 was enacted to address the complexities and protect the rights of employees within such arrangements.

This legislation acknowledges the unique vulnerabilities of employees in triangular employment situations by extending their ability to seek redress for grievances, not just against their formal employer but also against the host organization. It ensures that employees have the same protections and rights as those in traditional employment relationships, aiming to prevent exploitation and ensure fair treatment in the workplace.

‘Labour-for-hire, On-hire labour, Labour hire, Temping, Contingent labour’ are all terms to describe certain employees who are employed by one employer, but work under the control and direction of another business or organisation (referred to in the legislation as a controlling third party) in a triangular employment arrangement.

Why is this license relevant for EOR projects?

For Employer of Record (EOR) projects, understanding and complying with triangular employment law is crucial. EORs act as the official employer for administrative purposes, handling payroll, taxes, and compliance with local labor laws for employees who work at another company’s premises or under another company’s supervision. 

The law’s relevance lies in its provision for employee protection, making EORs accountable for the fair treatment of these workers, alongside the host organizations. It ensures that employees under EOR arrangements have a legal pathway to address grievances, thereby imposing a responsibility on EORs to maintain compliance with New Zealand’s employment laws.

What are the regulations companies need to follow to remain compliant in New Zealand?

To remain compliant, companies involved in triangular employment relationships must adhere to several key regulations:

01. Employment Agreements: Ensure all employment agreements clearly outline the nature of the triangular relationship, including the roles and responsibilities of each party.

02. Grievance Procedures: Implement and communicate clear procedures for addressing employment-related grievances, allowing employees to raise issues with either the formal employer or the host organization.

03. Fair Treatment: Guarantee that employees in triangular employment situations receive the same rights and protections as direct hires, including fair pay, work conditions, and health and safety protections.

04. Record Keeping: Maintain accurate and comprehensive records of employment terms, work conditions, and any grievances raised and resolved.

What are the consequences of non-compliance for businesses operating in New Zealand?

Non-compliance with the triangular employment law can have significant consequences for businesses operating in New Zealand. Penalties can range from financial fines to reputational damage. 

More severe violations may lead to legal action, including claims for unjust treatment or unfair dismissal, which could result in compensation orders or other remedies against the employer or host organization. Ensuring compliance is not only a legal requirement but also critical to maintaining a positive working relationship with employees and protecting the business’s reputation.

What are the limitations of the Triangular Employment arrangement in New Zealand?

While the Employment Relations (Triangular Employment) Amendment Act 2019 marks a significant step forward in protecting employees in non-traditional employment settings, it is not without its limitations. 

One of the key challenges is the practical implementation and enforcement of the law, especially in identifying the responsibilities of host organizations versus formal employers. 

Additionally, the law may not cover all nuances of triangular employment relationships, particularly in rapidly evolving sectors like technology and gig economy roles, where employment arrangements can be highly fluid and unconventional.

Speak to a member of the Sales Team at Horizons to know more about navigating Triangular Employment in New Zealand. 

Labour-for-Hire in New Zealand: Navigating Laws on Triangular Employment