How to draft secondment agreements

Our drafting masterclass series continues with a look at alternative working arrangements – namely, secondments, sabbaticals, fixed term roles and zero hours arrangements. In this article, we discuss the key factors in drafting a secondment agreement.

While a secondment within the same employer or group can be managed relatively informally, seconding an employee to a third party organisation, such as a client or customer, is best achieved using a formal secondment agreement between the two contracting parties. The secondment agreement between the employer of the employee being seconded (the secondee) and the “host” - to whom the secondee is seconded to - should contain certain key terms which are discussed below.

Employment status

The expectation with a secondment is that the secondee’s employment with their employer will not be affected by the secondment, that their employment will continue and that they will return to their original role at the end of the secondment.

However, there is a risk that, by virtue of working for the host, the secondee may become the host’s employee. This style of arrangement is similar to that of any agency worker working for an end user so it is, therefore, important to include terms in a secondment agreement to prevent that situation arising.

Statements to the effect that the secondee will remain employed by the employer at all times during the secondment; that there will be no interruption to the secondee’s period of continuous employment; and the secondee will return to work for the employer at the end of the agreed term, should therefore be included within the secondment agreement.

The consequence of this is that the secondee shall remain employed on their original terms and conditions of employment with their employer throughout the duration of the secondment. This, however, might mean that some minor amendments may be required to the overall employment contract so as to allow the secondment to take place, however these can be done relatively informally and should, ideally, be agreed in advance with the secondee.

Despite the express terms of the secondment agreement, it is still possible for the host to be considered the secondee’s employer if the classic tests for employment status are met. In order to reduce the chances of this, the secondment agreement should also state that the employer retains overall control over the secondee; that the host will only provide the minimum instruction and supervision necessary to allow the secondee to perform their duties; and that the secondee shall not become integrated into the hosts business.

Administration and management responsibilities

It is important that the secondment agreement makes clear which party retains the responsibility for administration and management of the secondee’s employment during the course of the secondment. There are two reasons for this – firstly, as noted above, reserving as much managerial control as possible to the employer helps avoid the conclusion that the host employs the secondee. Secondly, having a clear division of responsibility avoids any unnecessary confusion between the parties. As the secondee remains employed by their employer throughout, it makes most sense for the employer to be responsible for such matters.

The secondment agreement should therefore state that the employer will retain responsibility for administrative tasks such as: paying the secondee’s salary, benefits and pension contributions; reimbursing the secondee for reasonably incurred expenses; accounting for income tax and National Insurance contributions; approving and recording annual leave; and providing sick pay.

The employer should also retain responsibility for managing the secondee’s performance during the secondment, including dealing with capability and conduct issues. This will necessarily require feedback from the host as to how well the secondee is performing for them – a specific term can be included in the agreement to oblige the host to provide the employer with regular reports on the secondee’s progress.

Description of services

It is important to note that a secondee can only be asked to perform duties for the host which fall within the duties specified in their employment contract. If the duties clause in the employment contract is sufficiently widely drafted, there should not be a problem; if not, it will most likely be necessary to vary the employment contract before the secondment begins.

The secondment agreement therefore needs to include some description of the secondee’s duties during the secondment. One option is to append to the secondment agreement a full job description for the secondee’s intended role. On the other hand, the parties may prefer to keep the description of the services very general in order to give the host greater flexibility.

The agreement should also state the amount of time the secondee is required to commit to the secondment duties. Full-time arrangements are most common, but it is open to the employer to require the secondee to reserve a certain amount of time each week to its own work.

Data protection

Since the General Data Protection Regulation (GDPR) came into force on 25 May 2018, more thought needs to be given to how the secondee’s personal data will be shared between the employer and the host for the purposes of facilitating the secondment. In all likelihood, both the employer and the host will be data controllers for GDPR purposes.

Best practice is for both the employer and the host to append short privacy notices to the secondment agreement to set out what personal data each will process in respect of the secondee during the secondment, the reasons for doing so and the legal grounds relied upon. It should also be remembered that consent in an employment relationship is not usually considered to be ‘freely given’, so reliance on another ground (such as performance of a contract or legitimate business interest) is preferable.

Termination arrangements

The secondment agreement should specify a fixed duration for the secondment, and this will normally have been discussed between the employer and the host in advance. In the usual course of things, the secondment agreement will terminate automatically on the stated end date.

It is also important to include provisions stating how and under what circumstances the parties can bring the secondment to an end before then. Terms can be included to allow the secondment to be terminated on notice or with payment in lieu of notice. The secondment agreement should also specify the circumstances in which the secondment can be terminated summarily.

If the secondee will use the host’s equipment and information during the secondment, it is sensible to include a clause in the secondment agreement requiring the return of the host’s property and permanent deletion of the host’s data from any personal devices used throughout the secondment.

Other provisions

Other important clauses usually contained in a secondment agreement include:

• The location of where the secondee will undertake their work, together with the need for flexibility;
• A restrictive covenant prohibiting the host from poaching the secondee from the employer, both during the secondment and also for a specified period after the secondment ends;
• Confidentiality provisions, ensuring that the seocndee does not disclose confidential information to external parties either during or after the secondment;
• The terms upon which the host will reimburse the employer for the secondee’s salary and connected costs;
• Provisions determining how the secondee’s annual leave or sickness absence during the term of the secondment will affect the payments due from the host to the employer;
• An obligation on the host to maintain adequate insurance cover for the secondee;
• Conditions governing the creation and ownership of intellectual property; and
• An obligation on the host to indemnify the employer for any losses, costs, fees, etc. arising out of the secondment.

Writing to the secondee

It will also be important to inform the secondee of the terms they will be working under during the secondment. This is, of course, primarily a practical point – the secondee needs to be aware of what is expected of them during the secondment and how the arrangement is going to work.

In addition, it is arguable that the provision of a secondee to a host will mean that the employer is carrying out an ‘employment business’ for the purposes of the Conduct of Employment Agencies and Employment Businesses Regulations 2003. In that context, a separate agreement entered into between the employer and the secondee will help the employer to ensure that it has complied with its duties under those regulations to seek the secondee’s agreement and give them the required level of information. The simplest way to achieve this is to write a secondment letter to the secondee setting out all material terms agreed between the employer and host, and ask them to sign and return it to indicate their agreement.

Coming next

Next month, we will discuss the key considerations to bear in mind when drafting sabbatical agreements.