It is typical in today’s fast-moving and ever changing society that the benefits of engaging a labour-hire arrangement present a compelling commercial argument for those businesses wishing to do so.

  • It is relatively easy to arrange
  • The administration and selection of individuals is outsourced to a firm that specialises in that area
  • There are cost savings when it comes to entitlements such as Superannuation and Workers Compensation
  • There is the benefit of flexibility and the ability for firms to customize and rearrange their workforce in line with their business strategies as well as redeploy them in line with shifting demand for their products and services.

However, of all the underlying benefits which come with such arrangements – considerations around General Liability insurance and exposures of accepting labour hire is oftentimes overlooked.  

The greater utility a host employer seeks from labour hire arrangements, the greater the potential General Liability exposure they accept.

Despite the fact that a labour hire firm would (presumably) have their own adequate insurances in place it is common to see that whenever there is an occurrence that triggers a claim under the Public Liability Insurance, it is often the host employer who bears a significantly large proportion of any damages that is awarded to a third party (noting that the labour hire worker themselves are generally considered a third party in such arrangement).

This is due to the fact that:

  • The host employer is familiar with the surroundings and the environment in which they are operating in.
  • The host employer has a significant level of directional control over labour hire personnel. 
  • The host employer is responsible for designing and establishing a safe system of work as well as supplying labour hire personnel with proper induction, training and equipment necessary to perform tasks in a safe manner.
  • Importantly, host employers have an obligation in that they should be actively enforcing the safe system of work in which they create as well as supervise all workers to ensure they are compliant with same. Oftentimes this point is the key as merely relying on protocols and paperwork outlining that a system of work exists (without enforcement and active correction) is viewed dimly by a Court.

Despite the above, it should be noted that labour hire companies are not absolved from any General Liability claims involving their placed labour-hire personnel as they themselves owe a non-delegable duty of care to their employees (a topic in its own right) however the main point for Host Employers to consider is that whilst there is significant commercial benefits in adopting labour hire arrangements, it certainly comes with a greater level of risk and is considered by many insurers as a material change which subsequently has premium and excess implications.

Berkley Insurance Australia is a registered business name of the Australian branch of Berkley Insurance Company (ABN 53 126 559 706). Berkley Insurance Company is authorised by the Australian Prudential Regulation Authority as a general insurer to conduct new or renewal business.

The information and opinions contained in this document are general in nature. You should consider what insurance is appropriate for you or seek independent insurance advice.