What is a multi-party employment relationship?

When workers are not directly employed by the company to which they provide their services, their employment falls under contractual arrangements involving multiple parties. For example when a worker is deployed and paid by a private employment agency, but the work is performed for the user firm.

In most countries, an employment contract or relationship normally exists between the agency and the worker, whereas a commercial contract binds the agency and the user firm. Generally, there is considered to be no employment relationship between the temporary agency worker and the user firm. The user firm pays fees to the agency, and the agency pays the wages and social benefits to the worker.

Nonetheless some legal obligations of the user firm towards the temporary agency worker may arise in certain jurisdictions, especially with respect to occupational safety and health. In some cases, there is shared liability between the agency and the user firm.

Temporary agency work (TAW) is a key type of contractual arrangement involving multiple parties. It is characterised by a “triangular” relationship between the worker, the employment agency and a user firm. In some areas, TAW is referred as “labour dispatch” (particularly in Asian countries such as China, Republic of Korea or Japan) or “labour brokerage” (e.g. South Africa) and “labour hire” (e.g. Namibia).

Besides TAW, another type of contractual arrangement involving multiple parties is subcontracting. Subcontracting differs from TAW in that subcontractors in general do not merely hire out workers, but execute work that provides goods or a service. In addition, the subcontractor generally manages their workforce, even if their personnel work at the principal employer’s premises.  In practice, however, the difference between subcontracting services and subcontracting workers may be blurred.